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Item 7. Management’s Discussion and Analysis

2025-03-31 compared with 2024-03-06 · 373 added, 420 removed, 406 unchanged (66% of the section changed)

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Unless the context otherwise requires, in this Annual Report on Form 10-K, "INNOVATE" means INNOVATE Corp.

(formerly known as HC2 Holdings, Inc.) and the "Company," "we" and "our" mean INNOVATE together with its consolidated subsidiaries.

and the "Company," "we" and "our" mean INNOVATE together with its consolidated subsidiaries.

GAAP" means accounting principles accepted in the United States of America.

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For additional information on our business, refer to Note 1.

Organization and Business to the Consolidated Financial Statements included in this Annual Report on Form 10-K, which is incorporated herein by reference.

Organization and Business included in the Consolidated Financial Statements of this Annual Report on Form 10-K, which is incorporated herein by reference.

Cyclical Patterns

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weather or project site conditions;

financial condition of our customers and their access to capital;

customer spending patterns and the financial condition of our customers and their access to capital;

margins of projects performed during any particular period;

rising interest rates and inflation;

and economic, political and market conditions on a regional, national or global scale.

and regulatory, economic, political and market conditions on a regional, national or global scale.

Accordingly, our operating results in any particular period may not be indicative of the results that can be expected for any other period.

Recent Developments

On July 23, 2023, we announced the unexpected passing of Wayne Barr, our President, Chief Executive Officer and Director.

Barr had served as a director of INNOVATE since January 2014 and as CEO since November 2020.

He previously served as Lead Director during March 2020 and as Interim CEO from June 2020 until November 2020 when he was appointed as the Company's permanent President and CEO.

During his tenure as a director of INNOVATE, he has also served as Chair and/or as a member of several of the Board committees and as a director and/or officer of certain INNOVATE subsidiaries.

Following Mr.

Barr’s death, on July 25, 2023, Paul K.

Voigt was named Interim Chief Executive Officer of the Company.

Voigt has served as Senior Managing Director of Investments at Lancer Capital since 2019.

From 2014 to 2018, Mr.

Voigt served as Senior Managing Director of Investments of the Company and was involved with sourcing deals and capital raising for the Company.

On September 21, 2023, INNOVATE entered into a separation and release agreement with Suzi Herbst, our Chief Operating Officer.

Pursuant to the agreement, Ms.

Herbst's employment with the Company ceased on October 20, 2023 and the Company is paying Ms.

Herbst severance payments and benefits.

We continually evaluate strategic and business alternatives within our operating segments, which may include the following:

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In the longer-term, we may evaluate opportunities to acquire assets or businesses unrelated to our current or historical operations.

In the event we were to enter into a strategic transaction to sell any of our existing operations, our intention is to use available proceeds from such transaction to address our capital structure at Non-Operating Corporate and Spectrum.

In 2023, and subsequent to year end, as part of our strategic process, we engaged in several transactions that had or will have an effect on the results of operations and financial condition of our business and individual segments.

Rights Offering and Private Placement

On February 23, 2024, the Company's Board of Directors approved a plan to proceed with a $19.0 million rights offering for its common stock and fixed March 6, 2024 as the record date for holders of common stock entitled to participate in the rights offering.

On March 5, 2024, the Company set the subscription price at which the rights would be exercisable at $0.70 per share and entered into an investment agreement (the "Investment Agreement") with Lancer Capital ("Lancer Capital"), an entity controlled by Avram A.

Glazer, the Chairman of the Board and a beneficial owner of 29.1% of our common stock, pursuant to which the rights offering will be backstopped by Lancer Capital.

Because the rules of the New York Stock Exchange (“NYSE”) prohibit the issuance to Lancer Capital of more than 1% of our common stock outstanding before the issuance unless stockholder approval of such issuance is obtained, in lieu of purchasing common stock under the back-stop arrangement, Lancer Capital will purchase up to $19.0 million of Series C Non-Voting Participating Convertible Preferred Stock, par value $0.001 per share (“Series C Preferred Stock”) to be newly authorized by the Company.

The Series C Preferred Stock is intended to be the economic equivalent of common stock, participating on an as-converted basis in all dividends, distributions, merger consideration and all other consideration receivable by holders of common stock, and a means through which the back-stop arrangement can be effected prior to the completion of the stockholder vote and the satisfaction of any other regulatory requirements.

Pursuant to the Investment Agreement, and as a result of limitations on the amount that can be raised under the Company’s effective shelf registration statement on Form S-3, Lancer Capital will also purchase an additional $16.0 million of Series C Preferred Stock in a private placement transaction to close concurrently with the settlement of the rights offering.

Under the rules of the NYSE, because the shares Lancer Capital will purchase in the concurrent private placement are greater than 20% of our common stock outstanding before the issuance of the Series C Preferred, those shares of Series C Preferred Stock may not be converted unless stockholder approval of such issuance is obtained.

The Investment Agreement provides that, in the event that for any reason the rights offering is not settled by March 28, 2024, then Lancer Capital will purchase $25 million of Series C Preferred Stock.

We refer to this arrangement as the "equity advance." Upon the closing of the rights offering, to the extent that Lancer Capital would have, based on the number of shares of common stock actually sold upon exercise of the rights, purchased less than $25 million of Series C Preferred Stock under the backstop commitment and the concurrent private placement, the Company will redeem those excess shares of Series C Preferred Stock purchased by Lancer Capital under the equity advance at the redemption price of $1,000 per share from the proceeds of the rights offering.

The Series C Preferred Stock terms are set forth in a form of certificate of designations attached as Exhibit A to the Investment Agreement and include a liquidation preference junior to the Company’s existing preferred stock and equal to the Company’s common stock (other than a preference of $0.001 per share of Series C Preferred Stock that will be paid to the holders of thereof before any payment or distribution is made to the holders of the common stock).

The certificate of designations for the Series C Preferred Stock will be filed with the Secretary of State of the State of Delaware on the earlier of the closing of the equity advance or the settlement of the rights offering.

In connection with the Investment Agreement, on March 5, 2024, the Company and Lancer Capital entered into a registration rights agreement (the "Registration Rights Agreement") pursuant to which the Company granted Lancer Capital certain customary shelf demand and piggyback registration rights with respect to the common stock issuable upon conversion of the Series C Preferred Stock purchased under the Investment Agreement.

The foregoing summaries of the Investment Agreement and the Registration Rights Agreement are not complete and is subject to, qualified in their entirety by, and should be read in conjunction with, the full text of the Investment Agreement and the Registration Rights Agreement, which are filed as Exhibits 10.70 and 10.71 to this Annual Report on Form 10-K and incorporated herein by reference.

Assuming that the Company proceeds with the rights offering and that shares of Series C Preferred Stock are issued to Lancer Capital pursuant to the Investment Agreement, the Company intends to seek stockholder approval for the conversion of the Series C Preferred Stock into shares of our common stock at the Company’s 2024 annual stockholders meeting.

The rights offering will be made pursuant to the Company’s effective shelf registration statement on Form S-3, filed with the SEC on September 29, 2023 and declared effective on October 6, 2023, and a prospectus supplement containing the detailed terms of the rights offering to be filed with the SEC prior to the commencement of the rights offering.

The foregoing information regarding the rights offering is not complete and is subject to change.

The foregoing information regarding the rights offering shall not constitute an offer to sell or a solicitation of an offer to buy any securities, nor shall there be any offer, solicitation or sale of the securities in any state or jurisdiction in which such offer, solicitation or sale would be unlawful under the securities laws of such state or jurisdiction.

The rights offering will be made only by means of a prospectus and a related prospectus supplement.

Copies of the prospectus and related prospectus supplement, when they become available, will be distributed to all eligible stockholders as of the rights offering record date and may also be obtained free of charge at the website maintained by the SEC at www.sec.gov or by contacting the information agent for the rights offering.

The Series C Preferred Stock to be issued to Lancer Capital pursuant to the Investment Agreement will not be registered under the Act and may not be offered or sold in the United States absent registration or an applicable exemption from registration requirements.

Dispositions and Acquisition of Investments

Life Sciences

Triple Ring Partial Disposition and Scaled Cell Acquisition

On November 30, 2023, the Company sold 546,709 shares of its common stock of Triple Ring and 804,375 shares of its preferred stock of Triple Ring and exchanged 255,333 of Triple Ring common stock for 240,613 shares of Scaled Cell (valued at $0.9 million).

As a part of this transaction, the Company received $5.0 million in cash proceeds and recognized a loss of $0.2 million on the sale of the investment, which is reflected in Other income (expense), net, in the Consolidated Statement of Operations for the year ended December 31, 2023.

As of December 31, 2023, the Company holds 240,613 shares of Scaled Cell, representing a 20.1% interest.

Subsequent to the sale, the Company still holds 229,488 shares of common stock of Triple Ring, reflecting a 7.2% interest (1.9% on a fully diluted basis), and accounts for Triple Ring under the measurement alternative method as of December 31, 2023.

As of December 31, 2022 and prior to the sale in November 2023, the Company held a 25.8% interest in Triple Ring.

Sale of Remaining 19% Interest in HMN

On March 6, 2023, the Company, through New Saxon 2019 Limited (“New Saxon”), an indirect subsidiary of GMH, closed on the sale of its remaining 19% interest in HMN to subsidiaries and an affiliate of Hengtong Optic-Electric Co Ltd.

The sale was consummated pursuant to the terms of a supplemental agreement entered into by the parties in June 2022.

New Saxon received gross proceeds of $54.2 million, and interest income of $0.5 million, of which $4.4 million was withheld for a foreign tax payment.

During the year ended December 31, 2023, $15.9 million was paid to GMH's non-controlling interest holders and redeemable non-controlling interest holders pursuant to the partnership agreement.

New Saxon recognized a gain on sale of $12.2 million, which is reflected in Other income (expense), net in the Consolidated Statements of Operations for the year ended December 31, 2023.

In the event we were to enter into a strategic transaction to sell any of our existing operations, our intention is to use available proceeds from such transaction to address our capital structure.

During 2024, including subsequent to year end, as part of our strategic process, we engaged in several transactions that had or will have an effect on the results of operations and financial condition of our business and individual segments.

Rights Offering and Concurrent Private Placement

On March 8, 2024, the Company commenced a $19.0 million rights offering ("Rights Offering") for its common stock.

Pursuant to the Rights Offering, the Company distributed to each holder of the Company’s common stock, Series A-3 Convertible Participating Preferred Stock, Series A-4 Convertible Participating Preferred Stock and the 2026 Convertible Notes as of March 6, 2024 (the “rights offering record date”), transferable subscription rights to purchase 2.86 shares (0.2858 shares on a pre Reverse Stock Split basis) of the Company’s common stock at a price of $7.00 per whole share ($0.70 per whole share on a pre Reverse Stock Split basis).

Per the concurrent investment agreement entered into with Lancer Capital (the "Investment Agreement"), the Rights Offering was backstopped by Lancer Capital, an investment fund led by Avram A.

Glazer, the Chairman of the Board and the Company’s largest stockholder.

Due to limitations on the common stock that can be issued to Lancer Capital under the rules of the New York Stock Exchange ("NYSE"), in lieu of exercising its subscription rights, pursuant to the Investment Agreement, Lancer Capital would purchase up to $19.0 million of the Company’s newly issued Series C Non-Voting Participating Convertible Preferred Stock (the “Series C Preferred Stock”), for an issue price of $1,000 per share.

In connection with the backstop commitment, and as a result of limitations in the amount common equity that can be raised under the Company’s effective shelf registration statement on Form S-3, Lancer Capital also agreed to purchase an additional $16.0 million of Series C Preferred Stock in a private placement transaction ("Concurrent Private Placement") which was to close concurrently with the settlement of the Rights Offering.

Lancer Capital did not receive any compensation or other consideration for entering into or consummating the Investment Agreement.

As the Rights Offering had not yet settled by March 28, 2024, in accordance with the Investment Agreement, Lancer Capital purchased $25.0 million of Series C Preferred Stock, referred to as the "equity advance." On April 24, 2024, the Company completed and closed on the Rights Offering and issued a total of 530,611 shares of common stock (5,306,105 shares of common stock on a pre Reverse Stock Split basis) for $3.7 million.

Based on the number of shares of common stock actually sold upon exercise of the rights to third party investors, there were no excess shares of Series C Preferred Stock purchased by Lancer Capital under the equity advance that the Company was required to redeem, and Lancer Capital purchased an additional approximately 6,286 Series C Preferred Stock for $6.3 million under the backstop commitment.

In total, the Company received $35.0 million in aggregate gross proceeds related to the Rights Offering and Concurrent Private Placement and incurred $1.8 million in dealer manager fees and other related costs which have been capitalized into Additional paid in capital ("APIC").

INNOVATE has been utilizing and expects to continue to use the net proceeds from the Rights Offering and Concurrent Private Placement for general corporate purposes, including debt service and working capital.

In addition, as a result of the closing of the Rights Offering and Concurrent Private Placement, a mandatory prepayment was required on the CGIC Unsecured Note, and consequently, on April 26, 2024, INNOVATE redeemed $4.1 million of the CGIC Unsecured Note.

Under the rules of the NYSE, because the shares purchased by Lancer Capital were greater than 20% of the Company's common stock outstanding before the issuance of the Series C Preferred Stock, those shares of Series C Preferred Stock were not allowed to be converted until stockholder approval of such issuance was obtained.

On June 18, 2024, the Company held its annual shareholder meeting where Company's shareholder's approved the conversion of the Series C Preferred Stock into common stock.

As a result, approximately 31,286 shares of Series C Preferred Stock, which were held by Lancer Capital, were converted into 4,469,390 shares of common stock (44,693,895 shares of common stock on a pre Reverse Stock Split basis).

The Company waived its Tax Benefits Preservation Plan to permit persons exercising rights to acquire 4.9% or more of the outstanding common stock upon the exercise thereof without becoming an Acquiring Person (as defined in the Tax Benefits Preservation Plan).

INNOVATE has utilized the net proceeds from the Rights Offering and Concurrent Private Placement for general corporate purposes, including debt service and for working capital.

As a result of the closing of the Rights Offering and Concurrent Private Placement, a mandatory prepayment was required on the CGIC Unsecured Note, in the amount of the greater of $3.0 million or 12.5% of the net proceeds.

On April 26, 2024, INNOVATE redeemed $4.1 million of the CGIC Unsecured Note.

Reverse Stock Split

On August 8, 2024, the Company effected a 1-for-10 reverse stock split of its issued and outstanding common stock (the “Reverse Stock Split”) following stockholder approval.

The Reverse Stock Split became effective at 5:00 p.m.

Eastern Standard Time.

The Reverse Stock Split was implemented for the primary purpose of regaining compliance with the minimum bid price requirement for continued listing of the Company’s common stock on the NYSE.

As a result of the Reverse Stock Split, every ten shares of the Company’s common stock issued and outstanding were automatically reclassified and changed into one new share of the Company’s common stock, with whole shares issued for fractional shares.

Proportionate adjustments were made to the exercise prices and the number of shares underlying the Company’s outstanding equity awards, as applicable, as well as to the number of shares issuable under the Company’s equity incentive plans and conversion of the Company’s outstanding convertible securities.

The common stock issued pursuant to the Reverse Stock Split will remain fully paid and non-assessable.

The Reverse Stock Split did not change the $0.001 par value per share of the common stock or the authorized number of shares of common stock or preferred stock.

As a result of the Reverse Stock Split, the number of outstanding common shares was reduced from 130,529,931 to 13,166,057, inclusive of an additional 113,064 incremental whole shares issued for fractional shares.

Unless noted, all common shares and per share amounts of common stock, options and restricted stock and any associated debt or preferred stock conversion rates contained in the historical periods presented within this Management’s Discussion and Analysis of Financial Condition and Results of Operations and within the Consolidated Financial Statements have been retroactively adjusted to reflect the one-for-ten Reverse Stock Split.

Stockholders’ Rights Agreement - Tax Benefits Preservation Plan

On May 6, 2024, the Company terminated its Tax Benefits Preservation Plan entered into on April 1, 2023 (the “2023 Preservation Plan”) because the Company’s Board of Directors determined that the 2023 Preservation Plan was no longer necessary or desirable for the preservation of the Company’s ability to use its tax net operating losses and other certain tax assets.

In connection with the termination of the 2023 Preservation Plan, the Company has taken routine actions to deregister the related preferred stock purchase rights under the Securities Exchange Act of 1934, and to delist the preferred stock purchase rights from the NYSE.

These actions were administrative in nature and had no effect on the Company’s common stock, which will continue to be listed on the NYSE.

Amendment to Second and Restated 2014 Omnibus Equity Award Plan and Interim CEO Equity Awards

On September 30, 2024, the Board adopted, subject to stockholder approval, an amendment to the Company's Second Amended and Restated 2014 Omnibus Equity Award Plan ("Second A&R 2014 Plan") to increase the number of shares of the Company's common stock, par value $0.001 per share, available for issuance thereunder to 1,300,000 (the “Plan Amendment”).

The Plan Amendment was approved by holders of a majority in voting power on October 4, 2024, by written consent in lieu of a special meeting, and was effective as of October 29, 2024.

On October 29, 2024, when the Plan Amendment became effective, the following awards which were previously awarded to the Company's Interim CEO subject to stockholder approval of the Plan Amendment to increase the number of shares of common stock available thereunder to satisfy the settlement of the grant became effective:

(i) 95,322 of restricted stock unit awards ("RSU's"), which were awarded on October 11, 2023;

(ii) 100,000 option awards with a strike price of $25.00 (as retroactively adjusted for the Reverse Stock Split in 2024) and an expiration date of September 15, 2033, which were awarded on September 15, 2023;

(iii) 142,857 of RSUs, which were awarded on August 19, 2024;

and (iv) 100,000 option awards with a strike price of $4.22 and an expiration date of September 15, 2034, which were awarded on September 15, 2024.

Debt Obligations and Financing

In 2023 and 2022, we refinanced several of our loans and credit facilities and obtained new capital financing at the corporate and subsidiary level.

In addition to the Rights Offering and Concurrent Private Placement at the Non-Operating Corporate segment discussed above, during 2024 and subsequent to year end, we have refinanced some of our debt and obtained new capital financing at the subsidiary level.

This financing helped us provide needed capital for our operations and the operations of our subsidiaries.

Infrastructure

On December 12, 2023, DBMG and UMB entered into an amendment to the agreement that extended the maturity date of the Revolving Line from May 31, 2024 to August 15, 2025, increased the interest rate spread for the Revolving Line by 0.35% across all tiers, and established an interest rate floor of 4.25%.

The effective interest rate on the Revolving Line was 8.33% and 6.88% as of December 31, 2023 and 2022, respectively.

Interest is paid monthly.

The Revolving Line also includes a commitment fee equal to 0.25% per annum times the average daily unused availability under the line.

DBMG and Banker Steel, jointly and severally, have a subordinated 4.0% note payable to Banker Steel's former owner, in which Donald Banker's family trust has a 25% interest, and jointly and severally also had a subordinated 8.0% note payable to Donald Banker's family trust.

During the year ended December 31, 2023, DBMG made $12.1 million in scheduled repayments of the principal on these notes and made accelerated repayments of $16.6 million in full settlement of the 8.0% subordinated note.

Banker Steel also previously had a subordinated 11.0% note payable to Donald Banker of $6.3 million, which was redeemed in full by DBMG on April 4, 2022.

As of December 31, 2023, the 4.0% note payable had a remaining balance of $5.0 million.

On June 28, 2024, DBM and UMB entered into the Third Amendment to the UMB Credit Agreement, which added an incremental separate term loan of $25.0 million to the existing credit facility, with the same interest rate as the Revolving Line with UMB and the same maturity date as the initial UMB term loan which had an outstanding balance of $74.6 million as of December 31, 2024.

Life Sciences

During the year ended December 31, 2022, R2 Technologies entered into various note purchase agreements with Lancer Capital, an entity controlled by Avram A.

Glazer, the Chairman of INNOVATE's Board of Directors, for an aggregate $10.8 million in notes at a 18% per annum interest rate as of December 31, 2022.

During 2023, R2 closed on an additional $6.6 million of notes, including $1.3 million of unpaid accrued interest which was capitalized into the new principal balance, increasing the aggregate outstanding principal to $17.4 million as of December 31, 2023.

The per annum interest rate on the outstanding principal balance also increased to 20%.

In addition, after various amendments throughout 2023, R2 entered into an amendment with Lancer Capital on November 15, 2023 to extend the maturity date of all outstanding prior existing notes to the earlier of January 31, 2024 or within five business days of the date on which R2 receives an aggregate $20.0 million from the consummation of a debt or equity financing.

Subsequent to year end, the notes expired on January 31, 2024.

Effective January 31, 2024, R2 and Lancer Capital simultaneously issued a new 20% note with an aggregate original principal amount of $20.0 million, which is comprised of the prior outstanding principal amounts and unpaid accrued interest of $2.6 million which was capitalized into the new principal balance, with future interest payable monthly in arrears, in cash or, if not paid in cash, accrued and unpaid interest will be capitalized monthly into the principal balance.

The maturity date of the new note is April 30, 2024 or within five business days of the date on which R2 Technologies receives an aggregate $20.0 million from the consummation of a debt or equity financing or has a change in control, as defined in the agreement, with an optional prepayment of the entire then-outstanding and unpaid principal and accrued interest upon five-days written notice to Lancer Capital.

The new note also includes an exit fee payable upon the earliest of the maturity date, the acceleration date of the principal amount of the note, for any reason as defined in the agreement, or the date upon which any prepayment is made.

The exit fee shall be equal to 10.20% if payment is made anytime from February 1, 2024 through February 29, 2024, 10.37% if payment is made anytime from March 1, 2024 through March 31, 2024, and 10.54% if payment is made anytime from April 1, 2024 through April 30, 2024.

R2 Technologies had various short-term notes with Lancer Capital, which expired on January 31, 2024, and, effective January 31, 2024, a new 20% note with an aggregate original principal amount of $20.0 million was issued, which was comprised of all prior outstanding principal amounts and unpaid accrued interest of $2.6 million which was capitalized into the new principal balance.

Interest on the note accrues at 20% per annum and is payable monthly in arrears, in cash or, if not paid in cash, accrued and unpaid interest is capitalized monthly into the principal balance.

As of December 31, 2024, the total principal outstanding, including capitalized interest was $24.0 million.

The maturity date of the 20% $20.0 million note, as subsequently amended, was December 31, 2024, or within five business days of the date on which R2 Technologies receives an aggregate $20.0 million from the consummation of a debt or equity financing or has a change in control, as defined in the agreement, with an optional prepayment of the entire then-outstanding and unpaid principal and accrued interest upon five-days written notice to Lancer Capital.

The 20% $20.0 million note also includes various exit fees, as amended.

As of December 31, 2024, the exit fee, as amended, was equal to 11.90% of the principal amount being repaid, and effective July 31, 2024, an additional exit fee of $1.0 million was incurred each month until the end of November 2024.

As of December 31, 2024, total exit fees payable were $7.9 million.

The exit fees are payable on the earliest of the maturity date, the date of the acceleration of the principal amount of the note for any reason or, if any portion of the note is prepaid at any time, the date of such prepayment of the note.

Subsequent to year end, with an effective date of December 31, 2024, the maturity date of the note was extended to August 1, 2025.

In addition, the exit fee continues to increase by 0.17% each month until maturity and an additional exit fee of $1.0 million was incurred under the amendment, which also continues to increase by $1.0 million each month until maturity.

A new $5.0 million default fee will be payable on August 1, 2025, in the event all obligations under the note, including principal, any accrued and unpaid interest, and exit fees, are not repaid in full prior to the August 1, 2025, maturity date.

Refer to Note 11.

Debt Obligations in the Consolidated Financial Statements included in this Annual Report on Form 10-K, which is incorporated herein by reference for additional information on R2 Technologies' debt obligations.

On December 30, 2022, Broadcasting entered into a Seventh Omnibus Amendment to Secured Notes which, among other things, extended the maturity date of $52.2 million of its Senior Secured Notes, due December 30, 2022 to May 31, 2024.

Interest is capitalized and payable upon maturity of the principal.

The $52.2 million of Senior Secured Notes consisted of $19.3 million of 8.5% Senior Secured Notes and $32.9 million of 10.5% Senior Secured Notes.

The other terms of the $19.3 million 8.5% Senior Notes remained the same.

At the time of the extension, Broadcasting had accrued interest and other fees of $6.9 million.

The interest rate on the $32.9 million 10.5% Senior Notes was increased to 11.45% and cumulative accrued interest and exit fees of $17.5 million were capitalized into the principal balance with both note extensions accounted for as debt modification events.

All other terms were essentially the same.

Total outstanding principal after the refinancing was $69.7 million, and $6.9 million of accrued interest and fees remain accrued, with total exit fees of $7.6 million which were recorded as original issue discount with a corresponding liability reflected in Other Liabilities in the Consolidated Balance Sheet.

Interest is capitalized and payable upon maturity of the principal.

Concurrently therewith and as part of the consideration for extending the 10.5% Senior Notes in December 2022, Broadcasting amended warrants to purchase 145,825 shares of common stock of HC2 Broadcasting Holdings, Inc.

common stock held by the lenders of the 10.5% Senior Notes by extending the time to exercise such to the second half of 2026 and reducing the exercise price per share (i) from $140.00 to $0.01 in the case of the certain of the warrants and (ii) from $130.00 to $0.01 in the case of the remaining warrants.

The warrants are exercisable at any time.

The change in the fair value of the warrants was recorded as original issue discount with a corresponding impact reflected in Non-controlling interest of $3.1 million.

On August 8, 2023, Broadcasting entered into an Eighth Amendment to Secured Notes with its lenders which extended the maturity date of its Senior Secured Notes aggregate principal amount of $69.7 million, from May 31, 2024 to August 15, 2024.

In exchange, Broadcasting incurred an additional exit fee of $1.1 million which was recorded as original issue discount with a corresponding liability reflected in Other Liabilities in the Consolidated Balance Sheet.

On November 9, 2023, Broadcasting entered into a Ninth Amendment to its Secured Notes with its lenders which extended the maturity date of its Senior Secured Notes aggregate principal amount of $69.7 million, from August 15, 2024 to August 15, 2025.

In exchange, Broadcasting will pay additional exit fees of $7.2 million which are payable on the earlier of maturity or repayment of the principal.

Interest is also capitalized and payable upon maturity of the principal.

In addition, the time to exercise the related warrants was extended to August 2027.

As of December 31, 2023, the effective interest rates on the notes, as amended, ranged from 20.6% to 24.0% per annum.

In addition, INNOVATE Corp.

entered into a related side letter with the institutional investors, whereby INNOVATE agreed to utilize proceeds from the sale of certain of its existing operations, as allowable under the Company's current agreements and indentures and after all other required payments have been made, for repayment of a portion of Broadcasting's Senior Secured Notes.

Assuming there are sufficient proceeds remaining after such repayment, an additional $1.0 million exit fee is payable if repayment occurs by November 9, 2024, or $2.0 million if repayment occurs after that date.

In exchange for the additional exit fee, the institutional investors will return their equity interests in HC2 Broadcasting Holdings, Inc.

and equity interests in DTV America.

The Company accounted for the transactions related to the Eighth Amendment, Ninth Amendment and the side letter as debt modification events under US GAAP as the present value of cash flows under the amended terms of Broadcasting's Senior Secured Notes was less than 10% different from the present value of cash flows under the original terms of the notes.

As a result of the modifications, and as of December 31, 2023, the Company has total capitalized estimated exit fees of $15.9 million, which are reflected in Other Liabilities in the Consolidated Balance Sheet.

Debt Obligations included in the Consolidated Financial Statements of this Annual Report on Form 10-K, which is incorporated herein by reference, for additional information on the note and the various amendments during the years ended December 31, 2024 and 2023.

On June 20, 2024, Pansend closed on a new Series D Preferred Stock ("Series D") investment in R2.

As part of the transaction, R2 Technologies converted its intercompany notes and accrued interest with Pansend, together with an additional cash investment from Pansend, into new Series D convertible participating preferred stock, for a total new additional investment of $21.3 million, which is also eliminated on consolidation and increased Pansend's ownership in R2 Technologies to 81.4% as compared to 56.8% prior to the transaction.

Pansend's ownership in R2 Technologies was 81.4% and 56.6%, as of December 31, 2024 and 2023, respectively.

Subsequent to year end, on February 20, 2025, Pansend closed on a new $3.5 million convertible 13.0% note instrument with R2 Technologies, which is convertible, together with any accrued interest at the time of conversion, into a new Series E Preferred Stock ("Series E") in R2 Technologies upon written notice to R2 Technologies and has a maturity date of the earlier of July 31, 2025, or a change in control, as defined in the agreement.

The transaction is eliminated on consolidation.

Refer to Note 16.

Equity and Temporary Equity included in the Consolidated Financial Statements of this Annual Report on Form 10-K, which is incorporated herein by reference, for additional information on R2 Technologies' convertible preferred stock and convertible notes.

Non-Operating Corporate

On April 25, 2023, INNOVATE extended the maturity date of its Revolving Credit Agreement with MSD PCOF Partners IX, LLC (the "Revolving Line of Credit") from February 23, 2024 to March 16, 2025, changed the interest benchmark rates from LIBOR-based to SOFR-based rates, and lowered the amount of net cash proceeds from certain asset sales in excess of which a prepayment is required from $50.0 million to $10.0 million.

In March 2023, the Company paid down $15.0 million outstanding under the Revolving Line of Credit.

On May 8, 2023, INNOVATE drew an additional $8.0 million under the Revolving Line of Credit, and on July 31, 2023, INNOVATE drew an additional $7.0 million under the Revolving Line of Credit, bringing the total outstanding balance to $20.0 million.

Debt Obligations for additional information.

On May 9, 2023, INNOVATE issued a subordinated unsecured promissory note to CGIC in the principal amount of $35.1 million, in connection with the DBMGi Preferred Stock repurchase from CGIC.

Refer to Footnote 16.

Temporary Equity and Equity for additional information.

The CGIC Unsecured Note is due February 28, 2026, and bears interest at 9% per annum through May 8, 2024, 16% per annum from May 9, 2024 to May 8, 2025, and 32% per annum thereafter.

The CGIC Unsecured Note also requires a mandatory prepayment from the proceeds from certain asset sales and the greater of $3 million or 12.5% of the proceeds from certain equity sales.

Debt Obligations for additional information.

On May 6, 2024, we extended the maturity date of our Revolving Line of Credit with MSD from March 16, 2025, to May 16, 2025.

Subsequent to year end, on March 6, 2025, the maturity date of the Revolving Line of Credit was extended to August 1, 2025, with all other terms substantially unchanged.

During the year ended December 31, 2024, we repurchased $2.9 million principal amount of our 2026 Convertible Notes at a market discount for $1.1 million, which is inclusive of accrued interest of $0.1 million, and recognized a $1.9 million gain on debt repurchase within Other income, net in the Consolidated Statement of Operations included in this Annual Report on Form 10-K, which is incorporated herein by reference.

Equity Method Investments

In November 2022, MediBeacon amended its existing agreements with Huadong Medicine Co.

Ltd ("Huadong"), to provide approximately $10 million in the first half of 2023, including $7.5 million or 50% of the remaining $15 million milestone investment due upon FDA approval of MediBeacon's TGFR at a pre-money valuation of approximately $400 million.

On March 15, 2022, MediBeacon issued Pansend a $4.5 million 8.0% convertible note due March 2025, increasing the total outstanding principal due by MediBeacon to Pansend to $5.0 million.

Prior to December 6, 2023, MediBeacon issued $2.0 million in 12% convertible note payable to Pansend, increasing the total outstanding principal by MediBeacon to Pansend to $7.0 million.

On December 6, 2023, MediBeacon terminated the $6.5 million of prior outstanding convertible notes with Pansend and simultaneously issued a new 12% convertible note with an aggregate original principal amount of $7.2 million, which comprised of the prior outstanding convertible principal amounts and unpaid accrued interest of $0.7 million which was capitalized into the new principal balance, with future interest payable upon maturity of the note.

Subsequent to December 6, 2023, MediBeacon issued $2.0 million in 12% convertible notes payable to Pansend, and, as of December 31, 2023, the total outstanding principal by MediBeacon to Pansend was $9.7 million, comprised of $9.2 million of convertible notes and $0.5 million of secured notes payable.

Subsequent to year end, on February 12, 2024, MediBeacon issued Pansend an additional $0.5 million 12% convertible note.

As a result of these modifications and additional note issuances to MediBeacon during the year ended December 31, 2023, Pansend recognized an additional $4.7 million of equity method losses which were previously unrecognized because Pansend's carrying amount of its investment in MediBeacon had been previously reduced to zero.

On February 23, 2023, pursuant to its amended commercial partnership with Huadong, MediBeacon issued $7.5 million of its preferred stock to Huadong, which decreased Pansend's ownership in MediBeacon from approximately 47.2% as of December 31, 2022 to approximately 46.2% subsequent to the transaction.

As a result of this equity transaction, Pansend recognized a gain of $3.8 million in Other income (expense), net in the Consolidated Statements of Operations, which increased Pansend's basis in MediBeacon.

Concurrently, Pansend recognized equity method losses of $3.8 million which were previously unrecognized because Pansend's carrying amount of its investment in MediBeacon had been previously reduced to zero.

As of December 31, 2023, Pansend's carrying amount of its investment in MediBeacon remains at zero, inclusive of the $9.7 million in convertible notes which have been offset against recognized losses, and has cumulative unrecognized equity method losses relating to MediBeacon of $8.0 million.

On December 30, 2022, the Company entered into a letter agreement with CGIC pursuant to which CGIC and its affiliates agreed to vote certain shares of the Company’s Series A-3 Convertible Participating Preferred Stock, par value $0.001 per share, and the Company’s Series A-4 Convertible Participating Preferred Stock, par value $0.001 per share, to the extent such shares result in CGIC beneficially owning more than 9.9% of the aggregate voting power of the Company, in the same manner as the majority of the holders holding less than 10% of the Company’s common stock, par value $0.001 per share, vote their shares with respect to any matter pursuant to which such shares are entitled to vote.

Stockholders' Rights Agreement

On April 1, 2023, the Company entered into a Tax Benefits Preservation Plan (the "2023 Preservation Plan") with ComputerShare Trust Company, N.A., as rights agent (the "Rights Agent").

The 2023 Preservation Plan is intended to help protect the Company's ability to use its tax net operating losses and other certain tax assets ("Tax Benefits") by deterring an "ownership change," as defined under Section 382 of the Internal Revenue Code of 1986, as amended, and the Treasury Regulations thereunder (the "Code"), by a person or group of affiliated or associated persons from acquiring beneficial ownership of 4.9% or more of the outstanding common shares.

In connection with entering into the Plan, on April 1, 2023 the Board of Directors of the Company declared a dividend distribution of one right (a “Right”) for each outstanding share of common stock, par value $0.001 per share, of the Company (the “Common Stock”) to stockholders of record at the close of business on April 10, 2023 (the “Record Date”).

Each Right is governed by the terms of the Plan and entitles the registered holder to purchase from the Company a unit consisting of one one-thousandth of a share (a “Unit”) of Series B Preferred Stock, par value $0.001 per share (the “Series B Preferred Stock”), at a purchase price of $15.00 per Unit, subject to adjustment (the “Purchase Price”).

The Company had entered into a previous Tax Benefits Preservation Plan on August 30, 2021 (the “2021 Preservation Plan”), in order to help protect the Company’s ability to use its Tax Benefits by deterring an ownership change.

The 2021 Preservation Plan expired on March 31, 2023.

On June 15, 2023, holders of the Company’s common stock and preferred stock, voting as a single class and with the preferred stock voting on an as-converted basis, voted to ratify the amendment of the 2023 Preservation Plan to extend its final expiration date from October 1, 2023 to June 30, 2024, or such later date and time as may be subsequently approved.

Refer to Note 16.

Temporary Equity and Equity for additional information.

During the year ended December 31, 2024, MediBeacon issued an aggregate $2.3 million of 12% convertible notes payable to Pansend, increasing the total outstanding principal due to Pansend to $12.0 million.

As a result of these note issuances by MediBeacon during the year ended December 31, 2024, Pansend recognized $2.3 million of equity method losses which were previously unrecognized because Pansend's carrying amount of its investment in MediBeacon had been previously reduced to zero.

As of December 31, 2024, Pansend's carrying amount of its investment in MediBeacon remains at zero, inclusive of the $12.0 million in outstanding notes which have been offset against recognized losses, and has cumulative unrecognized equity method losses relating to MediBeacon of $17.0 million.

Subsequent to year end, in January 2025, MediBeacon received approval from the U.S.

Food and Drug Administration ("FDA") for its Transdermal GFR Measurement System ("TGFR").

Pursuant to the terms of MediBeacon's convertible notes, upon the FDA approval, Pansend's convertible notes and the related accrued interest together totaling $12.9 million were converted into Series 3 Preferred Stock.

In addition, pursuant to its amended commercial partnership with Huadong and, as a result of FDA approval, a $7.5 million milestone investment in its preferred stock by Huadong was in process.

This will decrease Pansend's ownership in MediBeacon from approximately 45.9% prior to the transaction to approximately 44.7% subsequent to the transaction.

On a fully diluted basis, Pansend's ownership in MediBeacon will decrease from 40.1% to 39.7%.

Financial Presentation Background

22 unchanged sentences

Loss from equity investees (2.3) (9.4) 7.1

Other income (expense), net 16.7 (1.2) 17.9

Other income, net 3.4 16.7 (13.3)

Loss from operations before income taxes $ (33.4) $ (34.4) $ 1.0

5 unchanged sentences

Preferred dividends 1.2 2.4 (1.2)

Net loss attributable to common stockholders $ (37.6) $ (40.8) $ 3.2

Net loss attributable to common stockholders and participating preferred stockholders $ (35.8) $ (37.6) $ 1.8

Revenue for the year ended December 31, 2024, decreased $315.9 million to $1,107.1 million from $1,423.0 million for the year ended December 31, 2023.

The decrease was primarily driven by our Infrastructure segment, and, to a lesser extent, our Spectrum segment.

The decrease at our Infrastructure segment was primarily driven by timing and size of projects at DBMG's commercial structural steel fabrication and erection business and lower revenue at the industrial maintenance and repair business.

This was partially offset by an increase at Banker Steel and the construction modeling and detailing business due to the timing and size of projects.

Revenues at our Spectrum segment decreased primarily as a result of the termination of Network and its associated Azteca content on December 31, 2022, partially offset by an increase in station revenues, which launched new markets and networks with its customers in 2023.

The decrease was driven by our Infrastructure segment, which was partially offset by increases at our Life Sciences and Spectrum segments.

The decrease at our Infrastructure segment was primarily driven by the timing and size of projects, including the effect of changes in estimated costs to complete those projects recognized in the ordinary course of business, at Banker Steel and DBMG's commercial structural steel fabrication and erection business, both of which had increased activity in the prior year on certain large commercial construction projects that have since been completed in the current year.

This was partially offset by an increase at the industrial maintenance and repair business as a result of an increase in project work.

The increase at our Life Sciences segment was attributable to R2 Technologies, primarily driven by an increase in sales in North America and worldwide of all R2 Technologies' products, including Glacial systems and consumables.

The increase at our Spectrum segment was primarily driven by network launches and expanded coverage with existing customers.

Income from operations :

Income from operations for the year ended December 31, 2024, increased $13.5 million to $40.0 million from $26.5 million for the year ended December 31, 2023.

The increase was due to a decrease in selling, general and administrative expenses ("SG&A") of $12.1 million and a decrease in depreciation and amortization of $7.0 million, partially offset by a net decrease in gross profit of $5.4 million and an increase in other operating expense of $0.6 million.

The decrease in consolidated SG&A was primarily driven by a decrease in SG&A at our Spectrum segment from the termination of Azteca in December 2022, a decrease in restructuring charges at our Infrastructure segment, decreases in SG&A at our Life Sciences segment as a result of cost reduction initiatives, decreases at our Non-Operating Corporate segment in compensation related expenses, legal, acquisition and disposition related expenses, which were partially offset by an accounts receivable write-off of $2.2 million in 2023 at our Infrastructure segment related to a legacy customer bankruptcy, and increases in salaries and wages and consulting expenses at our Infrastructure segment and the Station Group at Spectrum, as well as an increase in expenses at our Other segment as a result of the sale of New Saxon's 19% investment in HMN in 2023.

The decrease in consolidated depreciation and amortization was driven primarily by Banker Steel at our Infrastructure segment, as certain intangibles became fully amortized.

The $5.4 million decrease in consolidated gross profit was primarily driven by our Spectrum segment's termination of Network, which was partially offset by an increase at Spectrum's Station Group which launched new markets and networks with its customers in 2023 and an increase at our Infrastructure segment driven by timing of higher margin projects.

The increase in consolidated other operating expense was primarily driven by our Other segment due to a write-off of prepaid rent in 2023 related to the execution of a sublease, and an impairment of leasehold improvements in 2023 for unutilized space at our Non-Operating Corporate segment, partially offset by decreased impairment expense at our Spectrum segment, which had impaired the Network PLA intangible in 2022.

The improvement was due to an increase in other operating income of $10.3 million, a decrease in selling, general and administrative ("SG&A") expenses of $7.8 million, a decrease in depreciation and amortization of $2.6 million, which were partially offset by a net decrease in gross profit of $7.2 million.

The net increase in other operating income was driven by our Infrastructure segment, primarily as a result of a gain on a lease modification and net gains on disposals of fixed assets.

The overall decrease in SG&A was primarily driven by unrepeated severance and reductions in compensation-related expenses at both our Non-Operating Corporate and Spectrum segments, unrepeated transaction expenses at our Other segment related to the sale of New Saxon's 19.0% investment in HMN International Co., Ltd., formerly known as Huawei Marine Networks Co.

(“HMN”) in the prior year, as well as by our Infrastructure segment as a result of an unrepeated accounts receivable write-off in 2023, a decrease in expenses related to a foreign office closure in the prior year, and a decrease in legal fees and facility-related expenses.

The decrease in SG&A was partially offset by an increase in compensation-related expenses and expenses related to a domestic plant closure and other initiatives announced and executed during the current year to evaluate and realign internal operations and back-office functions at our Infrastructure segment and by R2 Technologies as a result of increases in share-based compensation expense, selling costs, and sales commissions due to an increase in system sales.

The overall decrease in depreciation and amortization was primarily driven by our Infrastructure segment, as certain customer contract intangibles became fully amortized in the second quarter of 2023.

The decrease in gross profit was primarily driven by our Infrastructure segment due to timing and size of projects that have since been completed in the current year, including the effect of changes in estimated costs to complete those projects recognized in the ordinary course of business.

This was partially offset by increases in gross profit at our Spectrum and Life Sciences segments.

The increase in gross profit at Spectrum was primarily driven by network launches and expanded coverage with existing customers.

The increase in gross profit at our Life Sciences segment was driven by R2 Technologies as a result of incremental Glacial system sales over the comparable year.

Interest expense :

Interest expense for the year ended December 31, 2024, increased $6.3 million to $74.5 million from $68.2 million for the year ended December 31, 2023.

The increase was primarily attributable to higher interest rates, increased amortization of debt issuance costs on the debt from extension fees, and higher outstanding principal balances at all segments for a majority of the current year, as a result of additional debt issued in 2023.

Refer to Note 11.

Debt Obligations of the Consolidated Financial Statements included in this Annual Report on Form 10-K, which is incorporated herein by reference, for further details on outstanding principal balances.

The increase was primarily attributable to increases in exit fees and a higher outstanding principal balance at our Life Sciences segment as a result of the capitalization of unpaid interest into the principal balance subsequent to the prior year, an increase in interest expense on our Non-Operating Corporate segment's CGIC Unsecured Note which was issued in May 2023 and had five months of interest in the prior year compared to a full year of interest in the current year, an increase in interest expense on our Corporate Revolving Line of Credit as a result of a higher outstanding balance drawn during the current year, and, to a lesser extent, an increase in interest at our Spectrum segment due to increased amortization from additional exit fees from refinancings during the second half of the prior year.

This was partially offset by our Infrastructure segment due to a net decrease in outstanding principal balances and a slight decrease in interest rates.

Loss from equity investees:

Loss from equity investees for the year ended December 31, 2023 increased $8.1 million to $9.4 million from $1.3 million for the year ended December 31, 2022.

The increase in loss was primarily driven by the sale of our investment in HMN on March 6, 2023, which had income in 2022, as well as equity method losses recorded from our investment in Triple Ring which had income in 2022, and higher equity method losses from our investment in MediBeacon, as a result of recognizing previously suspended losses due to the additional investments made in the current year, which then resulted in the investment's carrying amount again being reduced to zero.

Other income (expense), net:

Other income (expense), net for the year ended December 31, 2023 increased $17.9 million to income of $16.7 million from other expense of $1.2 million for the year ended December 31, 2022.

Other income, net for the year ended December 31, 2023 primarily consisted of a gain on the sale of our 19% equity investment in HMN of $12.2 million and a $3.8 million step-up gain from the increase in Pansend's carrying amount as a result of MediBeacon issuing $7.5 million of its preferred stock to Huadong, which was partially offset by a loss on the partial sale of our equity investment in Triple Ring of $0.2 million.

Loss from equity investees for the year ended December 31, 2024, decreased $7.1 million to $2.3 million from $9.4 million for the year ended December 31, 2023.

The decrease in loss was due to a decrease in losses recognized from MediBeacon, Triple Ring and HMN.

During the year ended December 31, 2024, as a result of additional convertible note investments in MediBeacon by Pansend, Pansend's basis in MediBeacon increased by $2.3 million and Pansend recognized $2.3 million of equity method losses that were previously unrecognized, whereas during the year ended December 31, 2023, as a result of $4.7 million convertible note investments in MediBeacon by Pansend and a $3.8 million equity transaction with Huadong, Pansend's basis in MediBeacon had increased by $8.5 million and Pansend had recognized $8.5 million of equity method losses that were previously unrecognized.

As of both December 31, 2024 and 2023, Pansend's net carrying amount of its investment in MediBeacon was zero, and Pansend had unrecognized losses from this investment.

The partial sale of Triple Ring was completed during the fourth quarter of 2023, which resulted in Pansend's investment in Triple Ring no longer being accounted for under the equity method of accounting.

Our previous investment in HMN was sold on March 6, 2023 and had losses for the approximately two months of ownership in 2023.

Thus, no equity method losses from either Triple Ring or HMN were recognized in the current year.

Refer to Note 6.

Investments of the Consolidated Financial Statements included in this Annual Report on Form 10-K, which is incorporated herein by reference, for additional information on our investments.

Other expense, net for the year ended December 31, 2022 was primarily comprised of a deemed distribution loss of $1.8 million related to a former subsidiary, CGIC, from a tax sharing arrangement and consolidation on the 2021 tax return, and a fair value adjustment to an investment in our Life Sciences segment.

Additionally contributing to the increase in Other income, net for the year ended December 31, 2023 is an increase in interest income earned primarily from $0.5 million related to the sale of our 19% equity investment in HMN, partially offset by an increase in foreign currency translation losses.

Investments included in the Consolidated Financial Statements of this Annual Report on Form 10-K for additional information on our equity investments.

Other income, net:

Other income, net for the year ended December 31, 2024, decreased $13.3 million to $3.4 million from $16.7 million for the year ended December 31, 2023.

The decrease was primarily driven by the unrepeated $12.2 million gain on the sale of our equity investment in HMN of in the prior year, an unrepeated $3.8 million equity investment step-up gain from an increase in Pansend's carrying amount as a result of MediBeacon issuing $7.5 million of its preferred stock to Huadong in the prior year, and a $2.2 million loss on debt extinguishment at R2 Technologies in the current year.

These decreases were partially offset by a $1.9 million gain on debt repurchase at our Non-Operating Corporate segment related to the partial repurchase of the 2026 Convertible Notes in 2024, an increase in foreign currency translation gains from our Infrastructure segment, an increase in interest income earned at our Life Sciences segment resulting from an increase in Pansend's convertible note receivable balance from MediBeacon subsequent to the prior year, and our Non-Operating Corporate segment which earned additional interest income on its money market accounts due to an increase in the outstanding deposited balances as compared to the prior year.

Income tax expense :

Income tax expense for the year ended December 31, 2024, increased $1.8 million to $6.3 million from $4.5 million for the year ended December 31, 2023.

The increase was primarily driven by an unrepeated net tax savings of $3.1 million from the CGIC consolidation on the 2021 tax return, which resulted in a partial release of the valuation in 2022.

Income tax expense primarily relates to the tax expense as calculated under ASC 740 for taxpaying entities, for which there was an increase in current state tax expense at certain taxpaying entities due to an increase in profitability.

The tax provision for the year ended December 31, 2023 includes a $1.1 million net tax benefit, consisting of a current tax expense of $4.4 million related to foreign withholding tax payment and a deferred tax benefit of $5.5 million related to the reversal of the deferred tax liability associated with the $11.3 million HMN put option agreement, both of which were related to the sale of New Saxon's 19% investment in HMN on March 6, 2023.

Additionally, the tax benefits associated with losses generated by the INNOVATE Corp.

consolidated income tax return and certain other businesses in both years have been reduced by a full valuation allowance as we do not believe it is more-likely-than not that the losses will be utilized prior to expiration.

The increase was primarily driven by the tax expense of INNOVATE's U.S.

consolidated group utilizing its remaining unlimited NOLs in 2024 and due to the Tax Cuts and Jobs Act's 80% limitation on net operating losses incurred after 2017 and the unrepeated $1.1 million tax benefit, consisting of a current tax expense of $4.4 million related to a foreign tax payment and a deferred tax benefit of $5.5 million related to the reversal of the deferred tax liability associated with the $11.3 million put option, both of which were related to the sale of New Saxon's 19.0% investment in HMN on March 6, 2023.

The Organization for Economic Cooperation and Development ("OECD") has announced an Inclusive Framework on Base Erosion and Profit Shifting including a Pillar Two Model to provide for a 15% global minimum tax on the earnings of multinational corporations with consolidated revenue over €750 million.

Many jurisdictions have enacted Pillar Two legislation that starts to become effective in 2024.

The OECD, and its member countries, continue to release new guidance and legislation on Pillar Two.

Based on current enacted laws, Pillar Two is not expected to materially impact our effective tax rate or cash flows in the next year.

We will continue to evaluate the impact on our financial position as new legislation or guidance is introduced which could change our current assessment.

Segment Results of Operations

1 unchanged sentence

(i) (gain) loss on sale or disposal of assets;

(ii) lease termination costs;

(ii) lease termination costs and (gains) losses on lease modifications;

(iii) asset impairment expense;

(iv) accretion of asset retirement obligations;

and (v) FCC reimbursements.

and (v) Federal Communications Commission (the "FCC") reimbursements.

Each table summarizes the results of operations of our operating segments (in millions).

10 unchanged sentences

Revenue for the year ended December 31, 2024, decreased $325.6 million to $1,071.6 million from $1,397.2 million for the year ended December 31, 2023.

The decrease was primarily driven by the timing and size of projects at DBMG's commercial structural steel fabrication and erection business and lower revenue at the industrial maintenance and repair business.

This was partially offset by an increase at Banker Steel and the construction modeling and detailing business due to the timing and size of projects.

The decrease was primarily driven by the timing and size of projects, including the effect of changes in estimated costs to complete those projects recognized in the ordinary course of business, at Banker Steel and DBMG's commercial structural steel fabrication and erection business, both of which had increased activity in the prior year on certain large commercial construction projects that that have since been completed.

This was partially offset by an increase at the industrial maintenance and repair business as a result of an increase in project work.

Cost of revenue :

Cost of revenue for the year ended December 31, 2024, decreased $312.2 million to $880.4 million from $1,192.6 million for the year ended December 31, 2023.

The decrease was primarily driven by the decrease in revenues from the timing and size of projects at DBMG's commercial structural steel fabrication and erection business and the industrial maintenance and repair business.

This was partially offset by an increase at Banker Steel and the construction modeling and detailing business due to the increase in revenues from the timing and size of projects.

Selling, general and administrative :

Selling, general and administrative expense for the year ended December 31, 2023 increased $2.1 million to $126.0 million from $123.9 million for the year ended December 31, 2022.

The increase was primarily driven by an increase in salaries and wages, an accounts receivable write-off of $2.2 million related to a legacy customer bankruptcy, and an increase in support and consulting expenses, partially offset by a decrease in restructuring charges, which included $2.1 million in 2023 for a foreign office closure as compared to $6.5 million in 2022 for internal operational project restructuring and other streamlining activities.

The decrease was primarily driven by the decrease in revenues at Banker Steel and DBMG's commercial structural steel fabrication and erection business from the timing of project activity on certain large commercial construction projects and decreases in costs as they wind down or have since been completed, which was partially offset by an increase in costs associated with the industrial maintenance and repair business as a result of an increase in project work.

Selling, general and administrative expense for the year ended December 31, 2024, decreased $2.9 million to $123.1 million from $126.0 million for the year ended December 31, 2023.

The decrease was primarily driven by an unrepeated accounts receivable write-off of $2.2 million related to a customer bankruptcy in the prior year, a decrease in expenses related to a foreign office closure in the comparable year, a decrease in legal fees and facility-related expenses, which was partially offset by an increase in compensation-related expenses, expenses related to a domestic plant closure and other initiatives announced and executed during the current year to evaluate and realign DBMG's internal operations and back-office functions.

Depreciation and amortization:

Depreciation and amortization for the year ended December 31, 2024, decreased $2.4 million to $12.0 million from $14.4 million for the year ended December 31, 2023.

The decrease was primarily driven by Banker Steel, as certain customer contract intangibles became fully amortized in the second quarter of 2023, and, to a lesser extent, certain capitalized internal-use software became fully depreciated in early 2023.

The decrease was primarily driven by Banker Steel, as certain customer contract intangibles became fully amortized in the second quarter of 2023, which was partially offset by an increase in depreciation at DBMG's commercial structural steel fabrication and erection business as a result of additional depreciable fixed assets placed into service.

Other operating income :

Other operating income for the year ended December 31, 2023 decreased $0.4 million to $0.2 million from $0.6 million for the year ended December 31, 2022.

The decrease in income was primarily driven by gain on an unrepeated asset sale in 2022.

Other operating income for the year ended December 31, 2024, increased $9.4 million to $9.6 million from $0.2 million for the year ended December 31, 2023.

Other operating income for the year ended December 31, 2024, related to a gain on a lease modification and net gains on the sales of various properties in the current year, which were partially offset by a loss related to a plant closure in the first quarter of 2024.

Life Sciences Segment

6 unchanged sentences

Loss from operations $ (14.1) $ (15.0) $ 0.9

Revenue for the year ended December 31, 2023 decreased $1.0 million to $3.3 million from $4.3 million for the year ended December 31, 2022.

The decrease in revenue was attributable to R2, primarily due to a decrease in system sales outside the U.S.

due to payment delays during 2023, as well as a decrease in consumables sold outside the U.S.

Partially offsetting the decrease was an increase in sales in the U.S.

due to the launch of the Glacial fx system in 2023 and an increase in Glacial Rx units sold in the U.S.

Revenue for the year ended December 31, 2024, increased $6.5 million to $9.8 million from $3.3 million for the year ended December 31, 2023.

The increase in revenue was attributable to R2 Technologies, primarily due to incremental unit sales of Glacial fx systems in North America and worldwide, which launched during the second half of 2023 in North America and in 2024 outside North America, as well as from an increase in consumable sales in both North America and worldwide.

In addition, the increase in revenue as compared to the prior year was partially driven by an increase in Glacial Rx units sold in North America and an increase in Glacial Spa units sold outside North America.

Cost of revenue :

Cost of revenue for year ended December 31, 2023 decreased $0.9 million to $2.6 million from $3.5 million for the year ended December 31, 2022.

The decrease in cost of revenue was attributable to R2, primarily driven by changes in revenue and the product mix sold.

Cost of revenue for the year ended December 31, 2024, increased $3.8 million to $6.4 million from $2.6 million for the year ended December 31, 2023.

The increase in cost of revenue was attributable to R2 Technologies, primarily driven by the increase in revenue from the additional system and consumables sales noted above, and, to a lesser extent, increases in royalty expenses, warranty expenses and freight costs driven by the additional systems sold.

The increase in cost of revenue was partially offset by changes in product mix sold as the Glacial fx and Glacial Spa systems have a lower production cost per system compared to the Glacial Rx.

Selling, general and administrative :

Selling, general and administrative expense for the year ended December 31, 2023 decreased $5.4 million to $15.2 million from $20.6 million for the year ended December 31, 2022.

The decrease was primarily driven by decreases from R2 in compensation-related expenses, marketing expenses, research and development costs and legal expenses as a result of cost reduction initiatives, as well as a decrease in bad debt expense.

Selling, general and administrative expense for the year ended December 31, 2024, increased $1.9 million to $17.1 million from $15.2 million for the year ended December 31, 2023.

The increase was primarily driven by R2 Technologies as a result of an increase in share-based compensation expense and increases in selling costs and sales commissions resulting from an increase in system sales.

Spectrum Segment

5 unchanged sentences

Depreciation and amortization 5.1 5.2 (0.1)

Other operating (income) loss

Other operating loss (income)

0.4 (0.1) 0.5

Loss from operations $ (3.4) $ (3.8) $ 0.4

Revenue for the year ended December 31, 2023 decreased $16.2 million to $22.5 million from $38.7 million for the year ended December 31, 2022.

The decrease was primarily driven by the elimination of advertising revenues at Azteca of $17.6 million, which ceased operations on December 31, 2022.

This was partially offset by an increase in station revenues, which launched new markets and networks with its customers in 2023.

Income (loss) from operations

$ 1.4 $ (3.4) $ 4.8

Revenue for the year ended December 31, 2024, increased $3.2 million to $25.7 million from $22.5 million for the year ended December 31, 2023.

The increase was primarily driven by network launches and expanded coverage with existing customers, which was partially offset by the termination of a number of smaller networks in the prior year.

Cost of revenue:

Cost of revenue for the year ended December 31, 2024, decreased $0.3 million to $11.5 million from $11.8 million for the year ended December 31, 2023.

The overall decrease was primarily driven by a decrease in advertising cost of revenue as a result of the termination of Azteca.

The decrease was primarily driven by decreased costs as a result of the renegotiation of broadcast tower- related contracts during the current year.

Selling, general and administrative:

Selling, general and administrative expense for the year ended December 31, 2024, decreased $1.7 million to $7.3 million from $9.0 million for the year ended December 31, 2023.

The decrease was primarily driven by the termination of the

Azteca America network, which was partially offset by an increase in severance expense and related compensation costs at our Station Group.

Depreciation and amortization:

Depreciation and amortization expense for the year ended December 31, 2023 decreased $0.6 million to $5.2 million from $5.8 million for the year ended December 31, 2022.

The decrease was primarily driven by the Program License Agreement ("PLA"), which was fully impaired in 2022.

Other operating (income) loss :

Other operating (income) loss for the year ended December 31, 2023 increased $1.4 million to income of $0.1 million from a loss of $1.3 million for the year ended December 31, 2022.

The improvement was primarily related to an unrepeated impairment loss relating to the full impairment of the PLA intangible in 2022.

The decrease was primarily driven by unrepeated severance expense in the prior year and a decrease in salaries and benefits expense as a result of a reduction in headcount.

Other operating loss (income) :

Other operating loss (income) for the year ended December 31, 2024, decreased $0.5 million to a loss of $0.4 million from income of $0.1 million for the year ended December 31, 2023.

The decrease in other operating income was primarily driven by a decrease in reimbursements received from the FCC for certain station modification costs and an increase in lease termination costs, which was partially offset by a decrease in asset impairment charges which in the prior year had primarily related to the write-off of certain redundant equipment and associated capitalized costs.

Non-Operating Corporate

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Other operating loss

0.2 0.5 (0.3)

Loss from operations $ (13.0) $ (16.4) $ 3.4

Selling, general and administrative :

Selling, general and administrative expenses for the year ended December 31, 2023 decreased $3.7 million to $15.8 million from $19.5 million for the year ended December 31, 2022.

primarily driven by decreases in salaries, benefits and bonus from a reduced headcount and change in CEO, a decrease in legal, disposition and acquisition expenses, and a slight decrease in severance expense, which related to the Company's former Chief Operating Officer in 2023 and to the Company's former Chief Legal Officer in 2022.

Selling, general and administrative expenses for the year ended December 31, 2024, decreased $3.1 million to $12.7 million from $15.8 million for the year ended December 31, 2023, primarily driven by unrepeated severance expense related to the Company's former Chief Operating Officer in the prior year, a decrease in salaries and benefits from a reduced headcount, decreases in accounting, consulting and legal fees, and a decrease in rent expense primarily as a result of the termination of leases in the current year.

Other operating loss:

Other operating loss for the year ended December 31, 2023 increased to $0.5 million from zero for the year ended December 31, 2022.

Other operating loss in 2023 consisted primarily of an impairment of leasehold improvements for unutilized office space.

(Loss) Income from Equity Investees

Other operating loss for the year ended December 31, 2024, decreased $0.3 million to $0.2 million from $0.5 million for the year ended December 31, 2023.

Other operating loss in the current period consisted of lease termination costs for two leases the Company exited in the current year, while other operating loss in the prior year primarily consisted of an impairment of leasehold improvements for unutilized office space.

Loss from Equity Investees

Year Ended December 31,

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Loss from equity investees $ (2.3) $ (9.4) $ 7.1

Loss from equity investees:

Life Sciences:

Loss from equity investees within our Life Sciences segment for the year ended December 31, 2023 increased $2.9 million to $9.1 million from $6.2 million for the year ended December 31, 2022.

The increase in loss from equity investees was primarily due to equity method losses from our investment in Triple Ring prior to its partial sale on November 30, 2023, which had income in 2022 which was primarily driven by a gain on debt extinguishment recognized in 2022, as well as higher equity method losses recognized from our investment in MediBeacon.

Pansend's carrying amount of its investment in MediBeacon has been reduced to zero and Pansend has unrecognized losses from this investment.

As a result of an additional equity investment made during the first quarter of 2023 by Huadong to MediBeacon, Pansend's basis in MediBeacon increased by $3.8 million, and, in addition, MediBeacon issued an additional $4.7 million in convertible notes payable to Pansend during 2023, which also increased Pansend's carrying amount of its investment in MediBeacon.

Pansend then recognized $8.5 million in equity method losses which were previously unrecognized and subsequently Pansend's carrying amount of its investment in MediBeacon remains at zero.

Loss from equity investees within our Other segment for the year ended December 31, 2023 increased $5.2 million to a loss of $0.3 million from income of $4.9 million for the year ended December 31, 2022.

The increase in loss was driven by our previous investment in HMN, which was sold on March 6, 2023, and had losses for the approximately two months of ownership in 2023, compared to net income in 2022.

Loss from equity investees within our Life Sciences segment for the year ended December 31, 2024, decreased $6.8 million to $2.3 million from $9.1 million for the year ended December 31, 2023.

The decrease in loss was due to a decrease in losses recognized from MediBeacon and Triple Ring.

As of both December 31, 2024 and 2023, Pansend's net carrying amount of its investment in MediBeacon was zero, and Pansend had unrecognized losses from this investment.

Also contributing to the decrease in loss from equity investees was the partial sale of Triple Ring which was completed during the fourth quarter of 2023 and resulted in Pansend's investment in Triple Ring no longer being accounted for under the equity method of accounting.

Thus, no equity method losses were recognized from Triple Ring in the current year.

Loss from equity investees within our Other segment for the year ended December 31, 2024, decreased $0.3 million to zero from a loss of $0.3 million for the year ended December 31, 2023.

Loss from equity investees for the year ended December 31, 2023 was driven by our previous investment in HMN, which was sold on March 6, 2023, and had losses for the approximately two months of ownership in 2023.

Refer to Note 6.

Investments of the Consolidated Financial Statements included in this Annual Report on Form 10-K, for additional information on our equity investments.

Investments included in the Consolidated Financial Statements of this Annual Report on Form 10-K, for additional information on our equity investments.

Non-GAAP Financial Measures and Other Information

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depreciation and amortization;

other operating (income) loss, which is inclusive of (gain) loss on sale or disposal of assets, lease termination costs, asset impairment expense and FCC reimbursements;

other operating (income) loss, which is inclusive of (gain) loss on sale or disposal of assets, lease termination costs, (gains) losses on lease modifications, asset impairment expense and FCC reimbursements;

interest expense;

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share-based compensation expense;

legacy accounts receivable expense;

restructuring and exit costs;

legacy accounts receivable write-offs;

realignment and exit costs;

and acquisition and disposition costs.

Adjusted EBITDA by segment is summarized as follows:

(in millions):

Year Ended December 31,

Increase / (Decrease)

Infrastructure

$ 89.1 $ 100.6 $ (11.5)

Life Sciences (14.5) (23.1) 8.6

Spectrum 7.1 2.0 5.1

Non-Operating Corporate

(10.4) (13.5) 3.1

Other and Eliminations — (1.0) 1.0

Adjusted EBITDA $ 71.3 $ 65.0 $ 6.3

The tables below provide reconciliations of net income (loss) attributable to INNOVATE Corp to Adjusted EBITDA for the years ended December 31, 2024 and 2023:

(in millions) Year Ended December 31, 2024

Infrastructure

Life Sciences Spectrum Non-Operating Corporate

Other and Eliminations INNOVATE

Life Sciences Spectrum Non-Operating Corporate Other and Eliminations INNOVATE

Net income (loss) attributable to INNOVATE Corp.

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Share-based compensation expense — 1.2 — 2.2 — 3.4

Legacy accounts receivable expense 2.2 — — — — 2.2

Restructuring and exit costs 2.1 — 0.1 — — 2.2

Realignment and exit costs 5.2 — — — — 5.2

Acquisition and disposition costs 0.6 0.2 0.2 0.1 — 1.1

2 unchanged sentences

Infrastructure

Life Sciences Spectrum Non-Operating Corporate

Other and Eliminations INNOVATE

Life Sciences Spectrum Non-Operating Corporate Other and Eliminations INNOVATE

Net income (loss) attributable to INNOVATE Corp.

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Share-based compensation expense — 0.2 — 2.0 — 2.2

Restructuring and exit costs 6.5 — 0.7 — — 7.2

Legacy accounts receivable write-off 2.2 — — — — 2.2

Realignment and exit costs 2.1 — 0.1 — — 2.2

Acquisition and disposition costs 2.1 0.1 0.1 0.5 1.2 4.0

Adjusted EBITDA $ 100.6 $ (23.1) $ 2.0 $ (13.5) $ (1.0) $ 65.0

Adjusted EBITDA by segment is summarized as follows:

(in millions):

Year Ended December 31,

2023 2022 Increase / (Decrease)

Infrastructure:

$ 100.6 $ 101.7 $ (1.1)

Life Sciences (23.1) (25.4) 2.3

Spectrum 2.0 4.5 (2.5)

Non-Operating Corporate

(13.5) (16.7) 3.2

Other and Eliminations (1.0) 4.0 (5.0)

Adjusted EBITDA $ 65.0 $ 68.1 $ (3.1)

Infrastructure:

Net income from our Infrastructure segment for the year ended December 31, 2023 decreased $0.5 million to $28.7 million from $29.2 million for the year ended December 31, 2022.

Net income from our Infrastructure segment for the year ended December 31, 2024, increased $11.6 million to $40.3 million from $28.7 million for the year ended December 31, 2023.

Adjusted EBITDA from our Infrastructure segment for the year ended December 31, 2024, decreased $11.5 million to $89.1 million from $100.6 million for the year ended December 31, 2023.

The slight decrease in Adjusted EBITDA was primarily driven by lower contributions from Banker Steel and the industrial maintenance and repair businesses due to the timing of projects, as well as an increase in recurring SG&A, primarily salaries and wages and consulting expenses.

This was partially offset by DBMG's commercial structural steel fabrication and erection business which had margin improvement as projects completed in 2022, which had lower margins due to market pressure on point-of-sale project margins during the COVID-19 pandemic, were replaced with more recent projects with higher point-of-sale margins in 2023 and increased contribution from the construction modeling and detailing business.

The decrease in Adjusted EBITDA was primarily driven by decrease in revenue at Banker Steel, due to timing of completion of certain large commercial construction projects and decreased gross margins at the construction modeling and detailing business.

These decreases were partially offset by an increase in revenue at the industrial maintenance and repair businesses, higher gross margins on certain large commercial construction projects that have since been completed at DBMG's commercial structural steel fabrication and erection, including the effect of changes in estimated costs to complete those projects recognized in the ordinary course of business, despite the decrease in revenue, as well as a decrease in recurring SG&A, primarily as a result of a decrease in legal fees, which was partially offset by an increase in compensation-related expenses.

Life Sciences:

Net loss from our Life Sciences segment for the year ended December 31, 2023 decreased $3.7 million to $15.5 million from $19.2 million for the year ended December 31, 2022.

Net loss from our Life Sciences segment for the year ended December 31, 2024, increased $4.2 million to $19.7 million from $15.5 million for the year ended December 31, 2023.

Adjusted EBITDA loss from our Life Sciences segment for the year ended December 31, 2024, decreased $8.6 million to $14.5 million from $23.1 million for the year ended December 31, 2023.

The decrease in Adjusted EBITDA loss was primarily due to a decrease in SG&A expenses at R2, driven by a decrease in compensation-related expenses, marketing costs, research and development and legal expenses as a result of cost reduction initiatives, as well as a decrease in bad debt expense.

The decrease was partially offset by higher equity method losses from our investment in Triple Ring driven by a gain on debt extinguishment recognized in 2022, as well as higher equity method losses recognized from our investment in MediBeacon in 2023 due to additional investments in MediBeacon during 2023 resulting in previously suspended losses being recognized and subsequently Pansend's carrying amount of its investment in MediBeacon remains at zero.

Net loss from our Spectrum segment for the year ended December 31, 2023 increased $8.9 million to $22.2 million from $13.3 million for the year ended December 31, 2022.

Adjusted EBITDA from our Spectrum segment for the year ended December 31, 2023 decreased $2.5 million to $2.0 million from $4.5 million for the year ended December 31, 2022.

The decrease in Adjusted EBITDA was primarily due to an increase in severance expense and related compensation costs at Station Group, and the termination of Azteca in 2022, which were partially offset by an increase in Station revenues, which launched new markets and networks with its customers in 2023.

The decrease in Adjusted EBITDA loss was primarily due to a decrease in equity method losses recognized from MediBeacon and Triple Ring, as discussed in the Loss from Equity Investees section above.

Additionally contributing to the decrease in Adjusted EBITDA loss was an increase in gross profit at R2 Technologies, driven by an increase in sales in North America and worldwide of all R2's products, including Glacial systems and consumables, which was partially offset by increases in selling costs and sales commissions due to the increase in system sales.

Net loss from our Spectrum segment for the year ended December 31, 2024, decreased $2.2 million to $20.0 million from $22.2 million for the year ended December 31, 2023.

Adjusted EBITDA from our Spectrum segment for the year ended December 31, 2024, increased $5.1 million to $7.1 million from $2.0 million for the year ended December 31, 2023.

The increase in Adjusted EBITDA was primarily due to an increase in revenue primarily driven by network launches and expanded coverage with existing customers, unrepeated severance in the prior year, as well as a decrease in salaries and benefits expense and a decrease in tower-related costs.

This was partially offset by the termination of a number of smaller networks and individual markets in the prior year.

Non-Operating Corporate:

Net loss from our Non-Operating Corporate segment for the year ended December 31, 2023 decreased $2.1 million to $33.2 million from $35.3 million for the year ended December 31, 2022.

Net loss from our Non-Operating Corporate segment for the year ended December 31, 2024, increased $2.1 million to $35.3 million from $33.2 million for the year ended December 31, 2023.

Adjusted EBITDA loss from our Non-Operating Corporate segment for the year ended December 31, 2024, decreased $3.1 million to $10.4 million from $13.5 million for the year ended December 31, 2023.

The decrease in Adjusted EBITDA loss was primarily driven by decreases in salaries, benefits and bonus from a reduced headcount and change in CEO, a decrease in legal expenses, and a slight decrease in severance expense, which related to the Company's former Chief Operating Officer in 2023 and to the Company's former Chief Legal Officer in 2022.

The decrease in Adjusted EBITDA loss was primarily driven by an unrepeated severance expense related to the Company's former Chief Operating Officer in the prior year, a decrease in salaries and benefits from a reduced headcount, decreases in accounting and consulting fees, and a decrease in rent expense primarily as a result of the termination of leases in the current year.

Other and Eliminations:

Net income from our Other segment and Eliminations for the year ended December 31, 2023 increased $4.3 million to $7.0 million from $2.7 million for the year ended December 31, 2022.

Adjusted EBITDA from our Other segment for the year ended December 31, 2023 decreased $5.0 million to an Adjusted EBITDA loss of $1.0 million from Adjusted EBITDA income of $4.0 million for the year ended December 31, 2022.

The decrease in Adjusted EBITDA was primarily driven by reduced contribution from HMN, which was sold on March 6, 2023 and, to a lesser extent, severance related expense incurred in 2023 at TIC Holdco, Inc.

Net income from our Other segment and Eliminations for the year ended December 31, 2024, decreased $6.9 million to $0.1 million from $7.0 million for the year ended December 31, 2023.

Adjusted EBITDA loss from our Other segment for the year ended December 31, 2024, decreased $1.0 million to zero from an Adjusted EBITDA loss of $1.0 million for the year ended December 31, 2023.

The decrease in Adjusted EBITDA loss was driven primarily by unrepeated severance expense at TIC Holdco, Inc.

in the prior year and our previous investment in HMN, which was sold on March 6, 2023, and had equity method losses for the approximately two months of ownership in 2023.

Backlog is our estimate of the U.S.

dollar amount of future revenues we expect to realize as a result of performing work on projects in backlog.

Projects in backlog consist of awarded contracts, letters of intent, notices to proceed, change orders, and purchase orders obtained.

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Short- and Long-Term Liquidity Considerations and Risks

Our Non-Operating Corporate segment consists of holding companies, and its liquidity needs are primarily for interest payments on its 2026 Senior Secured Notes, 2026 Convertible Notes, Revolving Line of Credit, CGIC Unsecured Note, and dividend payments on its Preferred Stock and recurring operational expenses.

Our Non-Operating Corporate segment consists of holding companies, and its liquidity needs are primarily for interest payments on its 2026 Senior Secured Notes, 2026 Convertible Notes, Revolving Line of Credit, CGIC Unsecured Note, and dividend payments on its Series A-3 and Series A-4 Preferred Stock and recurring operational expenses.

On a consolidated basis, as of December 31, 2024, we had $48.8 million of cash and cash equivalents, excluding restricted cash, compared to $80.8 million as of December 31, 2023.

On a stand-alone basis, as of December 31, 2023, our Non-Operating Corporate segment had cash and cash equivalents, excluding restricted cash, of $2.5 million compared to $9.1 million at December 31, 2022.

On a stand-alone basis, as of December 31, 2024, our Non-Operating Corporate segment had cash and cash equivalents, excluding restricted cash, of $13.8 million and $1.8 million of marketable securities, as compared to cash and cash equivalents, excluding restricted cash, of $2.5 million as of December 31, 2023.

Our subsidiaries' principal liquidity requirements arise from cash used in operating activities, debt service, and capital expenditures, including purchases of steel construction equipment, OTA broadcast station equipment, development of back-office systems, operating costs and expenses, and income taxes.

As of December 31, 2023, we had $722.8 million of principal indebtedness on a consolidated basis compared to $725.3 million as of December 31, 2022, a net decrease of $2.5 million, which was primarily due to a $44.2 million net decrease in debt at our Infrastructure segment, mostly offset by the issuance of the $35.1 million CGIC Unsecured Note at our Non-Operating Corporate segment and the issuance of additional debt at R2 Technologies in principal amount of $6.6 million.

As of December 31, 2023, on a stand-alone basis, our Non-operating Corporate segment indebtedness increased to $436.9 million from $401.8 million as of December 31, 2022, an increase of $35.1 million, attributable to the issuance of the $35.1 million CGIC Unsecured Note.

As of December 31, 2023, our Non-Operating Corporate segment's stand-alone indebtedness consists of the $330.0 million aggregate principal amount of 2026 Senior Secured Notes, $51.8 million aggregate principal amount of 2026 Convertible Notes, $35.1 million principal amount CGIC Unsecured Note and $20.0 million aggregate principal amount drawn on the Revolving Line of Credit.

As of December 31, 2024, we had $668.3 million of principal indebtedness on a consolidated basis compared to $722.8 million as of December 31, 2023, a net decrease of $54.5 million, which was primarily due to a $54.1 million net decrease in debt at our Infrastructure segment and a $7.0 million decrease in debt at our Non-Operating Corporate segment, partially offset by an increase at our Life Sciences Segment due to the capitalization of $6.6 million of unpaid accrued interest at R2 Technologies into their principal balance outstanding.

On a stand-alone basis, our Non-Operating Corporate segment principal indebtedness was $429.9 million and $436.9 million as of December 31, 2024 and 2023, respectively, a decrease of $7.0 million driven by a partial redemption payment of $4.1 million of the CGIC Unsecured Note on April 26, 2024, and the repurchase of $2.9 million principal amount of 2026 Convertible Notes during the year ended December 31, 2024.

The December 31, 2024, indebtedness balance consists of the $330.0 million aggregate principal amount of 2026 Senior Secured Notes, $48.9 million aggregate principal amount of 2026 Convertible Notes (which excludes the $2.9 million 2026 Convertible Notes repurchased by the Company), $31.0 million remaining principal amount of the CGIC Unsecured Note and $20.0 million aggregate principal amount drawn on our Revolving Line of Credit.

Our Non-Operating Corporate segment is required to make semi-annual interest payments on the 2026 Senior Secured Notes and 2026 Convertible Notes on February 1st and August 1st of each year, quarterly interest payments on the Revolving Line of Credit, and monthly interest payments on the CGIC Unsecured Note.

As described below, the interest rate on the CGIC Unsecured Note will increase from 9% per annum to 16% per annum on May 9, 2024 and from 16% per annum to 32% per annum on May 9, 2025.

We are required to make dividend payments on our outstanding Preferred Stock on January 15 th , April 15 th , July 15 th , and October 15 th of each year.

Our Non-Operating Corporate segment received $24.2 million in tax sharing payments from our Infrastructure segment for the year ended December 31, 2023.

As described below, the interest rate on the CGIC Unsecured Note increased from 9.0% per annum to 16.0% per annum on May 9, 2024, and will increase from 16.0% per annum to 32.0% per annum on May 9, 2025.

We are required to make dividend payments on our outstanding Series A-3 Preferred Stock and Series A-4 Preferred Stock on January 15 th , April 15 th , July 15 th , and October 15 th of each year.

Our Non-Operating Corporate segment received $8.1 million in net tax sharing payments from our Infrastructure segment for the year ended December 31, 2024.

In addition, DBMG redeemed the intercompany $41.8 million DBMG Series A Preferred Stock from DBMGi on June 28, 2024, for $41.8 million in cash, which was remitted to INNOVATE.

DBM Global Intermediate Holdco Inc.

("DBMGi") is a 100% owned subsidiary of INNOVATE and all intercompany transactions are eliminated on consolidation.

We have financed our growth and operations to date, and expect to finance our future growth and operations, through public offerings and private placements of debt and equity securities, credit facilities, vendor financing, finance lease financing and other financing arrangements, as well as cash generated from the operations of our subsidiaries.

In the future, we may also choose to sell assets or certain investments to generate cash.

On March 15, 2023, DBMGi received a redemption notice from CGIC, the holder of the Series A Fixed-to-Floating Rate Perpetual Preferred Stock of DBMGi (the “DBMGi Preferred Stock”) requesting that DBMGi redeem 41,820.25 shares of DBMGi Preferred Stock, representing all of the issued and outstanding shares of DBMGi Preferred Stock, within 60 days of the notice, or by May 15, 2023.

On May 9, 2023, the Company entered into a Stock Purchase Agreement and Subordinated Unsecured Promissory Note with CGIC whereby the Company agreed to purchase the 41,820.25 shares of DBMGi Preferred Stock for full satisfaction of the redemption notice.

In full consideration of the DBMGi Preferred Stock as well as an accrued dividend of $0.4 million, the Company paid CGIC $7.1 million on May 9, 2023, and issued a subordinated unsecured promissory note to CGIC in the principal amount of $35.1 million (the "CGIC Unsecured Note").

The CGIC Unsecured Note is due February 28, 2026, and bears interest at 9% per annum through May 8, 2024, 16% per annum from May 9, 2024 to May 8, 2025, and 32% per annum thereafter.

The CGIC Unsecured Note also requires a mandatory prepayment from the proceeds from certain asset sales and the greater of $3 million or 12.5% of the proceeds from certain equity sales.

Other covenants in the CGIC Unsecured Note are generally consistent with the Company's Indenture governing the 8.50% Senior Secured Notes due 2026, dated as of February 1, 2021, by and among the Company, the guarantors party thereto and U.S.

Bank National Association.

The foregoing is a summary only and does not purport to be a complete description of all of the terms, provisions, covenants, and agreements contained in the Stock Purchase Agreement and Subordinated Unsecured Promissory Note, and is subject to and qualified in its entirety by reference to the full text of the Stock Purchase Agreement and Subordinated Unsecured Promissory Note, which are referenced in our Exhibits listing in this Annual Report on Form 10-K, and are incorporated herein by reference.

On May 8, 2023, INNOVATE drew an additional $8.0 million under the Revolving Credit Agreement.

Additionally, on July 31, 2023, INNOVATE drew an additional $7.0 million under the Revolving Credit Agreement, increasing the outstanding balance to $20.0 million as of December 31, 2023.

On February 23, 2024, the Company's Board of Directors (the “Board”) approved a plan to proceed with a $19.0 million rights offering for its common stock and fixed March 6, 2024 as the record date for holders of common stock entitled to participate in the rights offering.

On March 5, 2024, the Company set the subscription price at which the rights would be exercisable at $0.70 per share and entered into an investment agreement (the "Investment Agreement") with Lancer Capital, a related party and an entity controlled by Avram A.

Glazer, the Chairman of the Board and a beneficial owner of 29.1% of our common stock, pursuant to which the rights offering will be backstopped by Lancer Capital.

Pursuant to the Investment Agreement, Lancer Capital will also purchase an additional $16.0 million of the Company's Series C Preferred Stock in a private placement transaction to close concurrently with the settlement of the rights offering.

For more information regarding the back-stop and private placement commitments from Lancer Capital under the Investment Agreement, see “Recent Developments.” At this time, management believes that the Company will be able to continue to meet its liquidity requirements and fund its fixed obligations (such as debt service and operating leases) and other cash needs for its operations for at least the next twelve months from the issuance of the Consolidated Financial Statements through a combination of available cash on hand, distributions from the Company’s subsidiaries and the rights offering together with the back-stop and private placement commitments from Lancer Capital under the Investment Agreement.

The ability of INNOVATE’s subsidiaries to make distributions to INNOVATE is subject to numerous factors, including restrictions contained in each subsidiary’s financing agreements, availability of sufficient funds at each subsidiary and the approval of such payment by each subsidiary’s board of directors, which must consider various factors, including general economic and business conditions, tax considerations, strategic plans, financial results and condition, expansion plans, any contractual, legal or regulatory restrictions on the payment of dividends, and such other factors each subsidiary’s board of directors considers relevant.

Although the Company believes that it will be able, to the extent needed, to raise additional debt or equity capital, refinance indebtedness or preferred stock, enter into other financing arrangements or engage in asset sales and sales of certain investments sufficient to fund any cash needs that we are not able to satisfy with the funds on hand or expected to be provided by our subsidiaries, there can be no assurance that it will be able to do so on terms satisfactory to the Company, if at all.

Such financing options, if pursued, may also ultimately have the effect of negatively impacting our liquidity profile and prospects over the long-term and dilute the holders of common stock.

Our ability to sell assets and certain of our investments to meet our existing financing needs may also be limited by our existing financing instruments.

In addition, the sale of assets or the Company’s investments may also make the Company less attractive to potential investors or future financing partners.

Rights Offering and Concurrent Private Placement

On March 8, 2024, the Company commenced a $19.0 million rights offering ("Rights Offering") for its common stock.

Per the concurrent investment agreement entered into with Lancer Capital (the "Investment Agreement"), the Rights Offering was backstopped by Lancer Capital, an investment fund led by Avram A.

Glazer, the Chairman of the Board and the Company’s largest stockholder.

Due to limitations on the common stock that can be issued to Lancer Capital under the rules of the NYSE, in lieu of exercising its subscription rights, pursuant to the Investment Agreement, Lancer Capital would purchase up to $19.0 million of the Company’s newly issued Series C Non-Voting Participating Convertible Preferred Stock (the “Series C Preferred Stock”), for an issue price of $1,000 per share.

Lancer Capital did not receive any compensation or other consideration for entering into or consummating the Investment Agreement.

On June 18, 2024, the Company held its annual shareholder meeting where Company's shareholder's approved the conversion of the Series C Preferred Stock into common stock.

INNOVATE utilized the net proceeds from the Rights Offering and Concurrent Private Placement for general corporate purposes, including debt service and for working capital.

As a result of the closing of the Rights Offering and Concurrent Private Placement, a mandatory prepayment was required on the CGIC Unsecured Note, and on April 26, 2024, INNOVATE redeemed $4.1 million of the CGIC Unsecured Note.

Equity and Temporary Equity for additional information.

Going Concern

The accompanying Consolidated Financial Statements have been prepared assuming that the Company will continue as a going concern.

However, as of the date of these financial statements, there is substantial doubt about the Company's ability to continue as a going concern within one year after the date that the financial statements are issued.

The principal conditions leading to this conclusion are the upcoming maturities of current debt at Corporate and certain of the Company's subsidiaries as well as from certain cross-default provisions in the Company's Senior Secured Notes.

Based on these conditions, the Company may not be able to meet its obligations at maturity and comply with certain cross-default provisions under the Senior Secured Notes over the next twelve months.

Management has evaluated the significance of these conditions in relation to the Company's ability to meet its obligations.

The potential inability to refinance or extend the maturity of the aforementioned current debt, or to obtain additional financing, raises substantial doubt about the Company's ability to continue as a going concern.

The Company plans to alleviate these conditions through various initiatives it is currently exploring, including potentially refinancing the debt at Corporate and its subsidiaries, pursuing asset sales, and raising additional capital.

However, there can be no assurance that the Company will have the ability to raise additional capital when needed, be successful in any asset sales, or refinance its existing debt, on attractive terms, or at all nor any assurances that lenders will provide additional extensions, waivers or amendments in the event of future non-compliance with the Company’s debt covenants or other possible events of default.

Further, there can be no assurance that the Company will be able to execute a reduction, extension, or refinancing of the debt, or that the terms of any replacement financing would be as favorable as the terms of the debt prior to the maturity date.

There can be no assurance that these plans will be successfully implemented or that they will mitigate the conditions that raise substantial doubt about the Company's ability to continue as a going concern.

The Consolidated Financial Statements included in this Annual Report on Form 10-K do not include any adjustments to the carrying amounts and classification of assets, liabilities, or expenses that may result if the Company is unable to continue as a going concern.

While the Company has noted the conditions above regarding its ability to continue as a going concern, it is important to note that the Company’s largest subsidiary, DBMG, is operationally profitable, continues to maintain a strong financial position and remains in good standing with its lenders.

Under INNOVATE’s Senior Secured Notes Indenture, DBMG is a restricted subsidiary, not a guarantor, and INNOVATE’s equity interests in DBMG are pledged as collateral.

Capital Expenditures

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Total $ 19.0 $ 18.4

Purchase Commitments

Unrecorded future minimum purchase commitments as of December 31, 2024, were $117.9 million.

Refer to Note 13.

Commitments and Contingencies included in the Consolidated Financial Statements of this Annual Report on Form 10-K, which is incorporated herein by reference, for additional information.

Non-Operating Corporate

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The 2026 Senior Secured Notes mature on February 1, 2026, and accrue interest at a rate of 8.50% per year, which interest is paid semi-annually on February 1 st and August 1 st of each year.

If the Company sells certain assets and the net cash proceeds from all applicable asset sales exceed $50.0 million since the issue date of the 2026 Senior Secured Notes, the Company may be required in certain circumstances to make an offer to purchase the notes with the net cash proceeds from such an asset sale in excess of such $50.0 million threshold at a price in cash equal to 101% of the principal amount thereof, together with accrued and unpaid interest, if any, to the date of purchase.

For additional information on the terms and conditions of the 2026 Senior Secured Notes, including guarantees, ranking and collateral, refer to Note 11.

Debt Obligations included in this Annual Report on Form 10-K, which is incorporated herein by reference.

2026 Convertible Notes - Terms and Conditions

As of December 31, 2023, we had $51.8 million 2026 Convertible Notes outstanding.

The 2026 Convertible Notes were issued under a separate indenture dated February 1, 2021, between the Company and U.S.

Debt Obligations included in the Consolidated Financial Statements of this Annual Report on Form 10-K, which is incorporated herein by reference.

2026 Convertible Notes

The original $51.8 million aggregate principal amount of 7.50% convertible notes (the "2026 Convertible Notes") were issued under a separate indenture dated February 1, 2021, between the Company and U.S.

Bank, as trustee (the "Convertible Indenture").

In July 2024, we repurchased $2.9 million principal amount of our 2026 Convertible Notes at a market discount for $1.1 million, which is inclusive of accrued interest of $0.1 million.

As of December 31, 2024, we had $48.9 million principal amount of 2026 Convertible Notes outstanding.

The 2026 Convertible Notes mature on August 1, 2026 unless earlier converted, redeemed or purchased.

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For additional information on the terms and conditions of the 2026 Convertible Notes, including optional redemption, conversion rights guarantees, ranking and collateral, refer to Note 11.

Debt Obligations included in this Annual Report on Form 10-K, which is incorporated herein by reference.

Debt Obligations included in the Consolidated Financial Statements of this Annual Report on Form 10-K, which is incorporated herein by reference.

Our debt contains customary events of default which could, subject to certain conditions, cause the 2026 Senior Secured Notes and the 2026 Convertible Notes to become immediately due and payable.

Revolving Credit Agreement

Revolving Line of Credit

We have a revolving credit agreement with MSD PCOF Partners IX, LLC ("MSD") which has a maximum commitment of $20.0 million ("Revolving Line of Credit"), of which $20.0 million had been drawn as of December 31, 2024.

Interest on loans under the Revolving Line of Credit accrues at SOFR plus 5.75% and is payable quarterly.

The Revolving Line of Credit also includes a commitment fee at a per annum rate of 1.0% calculated based off the actual daily amount of unused availability under the revolving credit line with MSD.

The maturity date of the Revolving Line of Credit is March 16, 2025.

The Revolving Line of Credit also includes a commitment fee at a per annum rate of 1.0% calculated based off the actual daily amount of unused availability under the Revolving Line of Credit with MSD.

The maturity date of the Revolving Line of Credit, as amended on May 6, 2024, is May 16, 2025.

Subsequent to year end, on March 6, 2025, the maturity date of the Revolving Line of Credit was extended to August 1, 2025, with all other terms substantially unchanged.

The amount outstanding under the Revolving Line of Credit is subject to mandatory prepayment from the net cash proceeds from certain asset sales in excess of $10.0 million.

In March 2023, the Company paid down $15.0 million of the Revolving Credit Agreement, and in May and July 2023, INNOVATE drew an aggregate additional $15.0 million under the Revolving Credit Agreement, bringing the outstanding balance to $20.0 million as of December 31, 2023.

For additional information on the terms and conditions of the Revolving Credit Facility, including guarantees, ranking and collateral, refer to Note 11.

Debt Obligations included in this Annual Report on Form 10-K, which is incorporated herein by reference.

For additional information on the terms and conditions of the Revolving Line of Credit, including guarantees and ranking and collateral, refer to Note 11.

Debt Obligations included in the Consolidated Financial Statements of this Annual Report on Form 10-K, which is incorporated herein by reference.

CGIC Unsecured Note

On May 9, 2023, in connection with the redemption of the DBMGi Preferred Stock, the Company issued a subordinated unsecured promissory note to CGIC in the principal amount of $35.1 million (the "CGIC Unsecured Note").

The CGIC Unsecured Note is due February 28, 2026, and bears interest at 9% per annum through May 8, 2024, 16% per annum from May 9, 2024 to May 8, 2025, and 32% per annum thereafter.

The CGIC Unsecured Note also requires a mandatory prepayment from the proceeds from certain asset sales and the greater of $3 million or 12.5% of the proceeds from certain equity sales.

Refer to Footnote 16.

Temporary Equity and Equity and 11.

Debt Obligations of the Consolidated Financial Statements included in this Annual Report on Form 10-K, which is incorporated herein by reference.

On May 9, 2023, in connection with the redemption of the DBMGi Series A Preferred Stock, the Company issued a subordinated unsecured promissory note to CGIC in the principal amount of $35.1 million (the "CGIC Unsecured Note").

The CGIC Unsecured Note is due February 28, 2026, and bore interest at 9.0% per annum through May 8, 2024, bears interest at 16.0% per annum from May 9, 2024, to May 8, 2025, and 32.0% per annum thereafter.

The CGIC Unsecured Note also requires a mandatory prepayment from the proceeds from certain asset sales and the greater of $3.0 million or 12.5% of the net proceeds from certain equity sales.

Bank National Association.

As a result of the closing of the Rights Offering, on April 24, 2024, INNOVATE redeemed $4.1 million of the CGIC Unsecured Note on April 26, 2024.

Refer to Note 16.

Equity and Temporary Equity and to Note 11.

Debt Obligations included in the Consolidated Financial Statements of this Annual Report on Form 10-K, which is incorporated herein by reference, for additional information.

Infrastructure

As of December 31, 2023, our Infrastructure segment had an aggregate principal amount of outstanding debt of $198.8 million, which consists of $91.4 million 3.25% Term Loan with UMB, $100.0 million Revolving Line with UMB, $5.0 million, a 4.0% Note due 2024, and $2.4 million of obligations under finance leases.

On August 2, 2022, DBMG negotiated and finalized an amendment to its UMB Revolving Line which included a retrospective change to the terms of the Fixed Coverage Ratio, and an increase in the UMB Revolving Line commitment from $110.0 million to $135.0 million, among other things.

On December 12, 2023, Infrastructure and UMB entered into an amendment to the agreement that extended the maturity date of the Revolving Line from May 31, 2024 to August 15, 2025, increased the interest rate spread for the Revolving Line by 0.35% across all tiers, and established an interest rate floor of 4.25%.

The Revolving Line also includes a commitment fee equal to 0.25% per annum times the average daily unused availability under the line.

Banker Steel also previously had a subordinated 11.0% note payable to Donald Banker of $6.3 million, which was redeemed in full by DBMG on April 4, 2022.

As of December 31, 2023, the 4.0% note payable had a remaining balance of $5.0 million.

As of December 31, 2024, our Infrastructure segment has aggregate principal outstanding debt, including obligations under finance leases, of $144.7 million.

DBMG has a $135.0 million Revolving Line with UMB that bears interest at a prime rate minus a spread with an interest rate floor of 4.25%.

As of December 31, 2024, the outstanding balance was $45.0 million.

The effective interest rate on the Revolving Line with UMB was 6.98% as of December 31, 2024.

The Revolving Line with UMB matures on August 15, 2025, and interest is paid monthly.

The Revolving Line with UMB also includes a commitment fee equal to 0.25% per annum times the average daily unused availability under the line.

DBMG also has a $74.6 million term loan due 2026 (the "3.25% UMB Term Loan"), which expires May 31, 2026, and bears interest at an annual rate of 3.25% with an effective interest rate of 3.3%.

Interest is paid monthly.

On June 28, 2024, DBM and UMB entered into the Third Amendment to the UMB Credit Agreement.

The amendment added an incremental separate term loan of $25.0 million to the existing credit facility, of which $24.5 million is outstanding as of December 31, 2024.

The incremental term loan bears the same interest rate as the Revolving Line with UMB and has the same maturity date as the initial 3.25% UMB Term Loan which had a balance of $74.6 million as of December 31, 2024.

Principal payments and interest are paid monthly.

During the year ended December 31, 2024, DBMG made $5.0 million in scheduled payments on the 4.0% note that was payable to Banker Steel's former owner.

The 4.0% note matured on March 31, 2024, and was fully redeemed on April 2, 2024.

Refer to Note 11.

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As of December 31, 2024, our Life Sciences segment has aggregate principal outstanding debt of $24.0 million.

During the year ended December 31, 2022, R2 Technologies entered into various note purchase agreements with Lancer Capital, an entity controlled by Avram A.

Glazer, the Chairman of INNOVATE's Board of Directors, for an aggregate $10.8 million in notes at a 18% per annum interest rate as of December 31, 2022.

The per annum interest rate on the outstanding principal balance also increased to 20%.

Subsequent to year end, the notes expired on January 31, 2024.

Interest on the note accrues at 20% per annum and is payable monthly in arrears, in cash or, if not paid in cash, accrued and unpaid interest is capitalized monthly into the principal balance.

The maturity date of the 20% note, as subsequently amended, was December 31, 2024, or within five business days of the date on which R2 Technologies receives an aggregate $20.0 million from the consummation of a debt or equity financing or has a change in control, as defined in the agreement, with an optional prepayment of the entire then-outstanding and unpaid principal and accrued interest upon five-days written notice to Lancer Capital.

The 20% $20.0 million note also includes various exit fees, as amended.

As of December 31, 2024, total exit fees payable were $7.9 million.

Subsequent to year end, with an effective date of December 31, 2024, the maturity date of the note was extended to August 1, 2025.

Also subsequent to year end, on February 20, 2025, Pansend closed on a new $3.5 million convertible 13.0% note instrument with R2 Technologies, which is convertible, together with any accrued interest at the time of conversion, into a new Series E Preferred Stock ("Series E") in R2 Technologies upon written notice to R2 Technologies and has a maturity date of the earlier of July 31, 2025, or a change in control, as defined in the agreement.

The transaction is eliminated on consolidation.

Refer to Note 11.

Related Parties in the Consolidated Financial Statements included in this Annual Report on Form 10-K, which is incorporated herein by reference for additional information on R2 Technologies' debt obligations.

As of December 31, 2023, our Spectrum segment has aggregate principal outstanding debt of $69.7 million.

Interest is capitalized and payable upon maturity of the principal.

The $52.2 million of Senior Secured Notes consisted of $19.3 million of 8.5% Senior Secured Notes and $32.9 million of 10.5% Senior Secured Notes.

The other terms of the $19.3 million 8.5% Senior Notes remained the same.

At the time of the extension, Broadcasting had accrued interest and other fees of $6.9 million.

All other terms were essentially the same.

Interest is capitalized and payable upon maturity of the principal.

The warrants are exercisable at any time.

The change in the fair value of the warrants was recorded as original issue discount with a corresponding impact reflected in Non-controlling interest of $3.1 million.

In exchange, Broadcasting will pay additional exit fees of $7.2 million which are payable on the earlier of maturity or repayment of the principal.

Interest is also capitalized and payable upon maturity of the principal.

In addition, the time to exercise the related warrants was extended to August 2027.

As of December 31, 2023, the effective interest rates on the notes, as amended, ranged from 20.6% to 24.0% per annum.

In addition, INNOVATE Corp.

entered into a related side letter with the institutional investors, whereby INNOVATE has agreed to utilize proceeds from the sale of certain of its existing operations, as allowable under the Company's current agreements and indentures and after all other required payments have been made, for repayment of a portion of Broadcasting's Senior Secured Notes.

Assuming there are sufficient proceeds remaining after such repayment, an additional $1.0 million fee is payable if repayment occurs by November 9, 2024, or $2.0 million if repayment occurs after that date.

In exchange for the additional fee, the institutional investors will return their equity interests in HC2 Broadcasting Holdings, Inc.

and equity interests in DTV America.

Debt Obligations included in the Consolidated Financial Statements of this Annual Report on Form 10-K, which is incorporated herein by reference, for additional information.

As of December 31, 2024, our Spectrum segment has aggregate principal outstanding debt of $69.7 million, consisting of 8.50% and 11.45% Notes.

Interest is capitalized and payable upon maturity of the notes.

The maturity date, as amended, of Spectrum's 8.50% and 11.45% Notes, is August 15, 2025.

The exit fees associated with the notes, which are payable on the earlier of maturity or repayment of the principal, were recorded as original issue discount and are being amortized over the remaining life of the notes, which is assumed to be the maturity date.

A corresponding liability of $15.9 million is reflected within Accrued Liabilities in the Consolidated Balance Sheet as of December 31, 2024.

As of December 31, 2024 and 2023, the weighted-average effective interest rates on the notes, as amended, was 22.8%.

During November 2023, concurrently with Broadcasting's execution of the Ninth Amendment to Secured Notes, which among other things extended the maturity of the notes, INNOVATE entered into a related side letter with the lenders, whereby INNOVATE agreed to utilize proceeds from the sale of certain of its existing operations, as allowable under the Company's current agreements and indentures and after all other required payments have been made, for repayment of a portion of our Spectrum segment's Senior Secured Notes.

Assuming there are sufficient proceeds remaining after such repayment, an additional $2.0 million is payable for payments made after November 9, 2024, and in exchange for the additional fee, the institutional investors will return their equity interests in HC2 Broadcasting Holdings, Inc.

and their equity interests in DTV America.

Refer to Note 11.

Debt Obligations to the Consolidated Financial Statements included in this Annual Report on Form 10-K for additional details regarding the indebtedness of our Infrastructure, Life Sciences and Spectrum segments.

Debt Obligations included in the Consolidated Financial Statements of this Annual Report on Form 10-K, which is incorporated herein by reference, for additional information.

Restrictive Covenants

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These covenants include maintenance of (1) liquidity and (2) collateral coverage.

The maintenance of liquidity covenant provides that the Company will not permit the aggregate amount of (i) all unrestricted cash and Cash Equivalents of the Company and the Subsidiary Guarantors, (ii) amounts available for drawing under revolving credit facilities and undrawn letters of credit of the Company and the Subsidiary Guarantors and (iii) dividends, distributions or payments that are immediately available to be paid to the Company by any of its Restricted Subsidiaries to be less than the Company’s obligation to pay interest for the next six months on the 2026 Senior Secured Notes and all other Debt, including Convertible Preferred Stock mandatory cash dividends or any other mandatory cash pay Preferred Stock but excluding any obligation to pay interest on Convertible Preferred Stock or any other mandatory cash payments on Preferred Stock which, in each case, may be paid by accretion or in-kind in accordance with its terms of the Company and its Subsidiary Guarantors.

The maintenance of liquidity covenant provides that the Company will not permit the aggregate amount of (i) all unrestricted cash and Cash Equivalents of the Company and the Subsidiary Guarantors, (ii) amounts available for drawing under revolving credit facilities and undrawn letters of credit of the Company and the Subsidiary Guarantors and (iii) dividends, distributions or payments that are immediately available to be paid to the Company by any of its Restricted Subsidiaries to be less than the Company’s obligation to pay interest for the next six months on the 2026 Senior Secured Notes and all other Debt, including Convertible Series A-3 and Series A-4 Preferred Stock mandatory cash dividends or any other mandatory cash pay Series A-3 and Series A-4 Preferred Stock but excluding any obligation to pay interest on Series A-3 and Series A-4 Preferred Stock or any other mandatory cash payments on Series A-3 and Series A-4 Preferred Stock which, in each case, may be paid by accretion or in-kind in accordance with its terms of the Company and its Subsidiary Guarantors.

As of December 31, 2024, the Company was in compliance with this covenant.

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As of December 31, 2024, the Company was in compliance with this covenant.

The instruments governing the Company’s Preferred Stock also limit the Company’s and its subsidiaries ability to take certain actions, including, among other things, to incur additional indebtedness;

issue additional Preferred Stock;

The instruments governing the Company’s Series A-3 Preferred Stock and Series A-4 Preferred Stock also limit the Company’s and its subsidiaries ability to take certain actions, including, among other things, to incur additional indebtedness;

issue additional Series A-3 Preferred Stock and Series A-4 Preferred Stock;

engage in transactions with affiliates;

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There is no assurance the Company will be able to complete any non-operational transaction it may undertake to maintain compliance with covenants under the Secured Indenture or, even if the Company completes any such transaction, that it will be able to maintain compliance for any subsequent period.

The UMB Term Loan and UMB Revolving Line associated with our Infrastructure segment contains customary restrictive and financial covenants related to debt levels and performance, including a Fixed Charge Coverage Ratio covenant, as defined in the agreement.

The UMB term loans and Revolving Line with UMB associated with our Infrastructure segment contain customary restrictive and financial covenants related to debt levels and performance, including a Fixed Charge Coverage Ratio covenant, as defined in the agreement.

As of December 31, 2024, we were in compliance with the covenants of our debt agreements.

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Year Ended December 31, Increase / (Decrease)

Cash provided by (used in) operating activities 26.5 (9.5) 36.0

Cash provided by (used in) investing activities 39.1 (22.5) 61.6

Cash (used in) provided by financing activities (65.3) 68.1 (133.4)

Cash provided by operating activities $ 9.1 $ 26.5 $ (17.4)

Cash (used in) provided by investing activities (13.9) 39.1 (53.0)

Cash used in financing activities (26.5) (65.3) 38.8

Effects of exchange rate changes on cash, cash equivalents and restricted cash (1.7) (0.2) (1.5)

Net increase in cash and cash equivalents, including restricted cash $ 0.1 $ 34.7 $ (34.6)

Net (decrease) increase in cash and cash equivalents, including restricted cash $ (33.0) $ 0.1 $ (33.1)

Operating Activities

Cash provided by operating activities was $26.5 million for the year ended December 31, 2023, as compared to cash used in operating activities of $9.5 million for the year ended December 31, 2022, an improvement of $36.0 million.

Cash flows from operations are primarily influenced by changes in the timing of demand for services and operating margins, but can also be affect ed by working capital needs associated with our operations.

For the year ended December 31, 2023, the improvement in cash provided by operating activities was primarily due to an improvement in working capital cash flows at our Infrastructure segment, primarily from changes in contract-related assets and liabilities at our Infrastructure segment, which was partially offset by an increase in net loss after non-cash adjustments.

Cash provided by operating activities was $9.1 million for the year ended December 31, 2024, as compared to $26.5 million for the year ended December 31, 2023, a decrease of $17.4 million.

Cash flows from operations are primarily influenced by changes in the timing of demand for services and by operating margins, but can also be affect ed by working capital needs associated with our operations.

For the year ended December 31, 2024, the decrease in operating cash flows was primarily driven by a decrease in operating cash flows at our Infrastructure segment, partially offset by improvements at our Non-Operating Corporate segment and our Other segment.

The decrease in operating cash flows at our Infrastructure segment was primarily due to the timing of completion of certain large commercial construction projects and decreased gross profit, and the net decrease in working capital cash flows at our Infrastructure segment was primarily driven by normal business fluctuations in accounts receivable, contract-related assets and liabilities, other accrued liabilities and other current liabilities.

Partially offsetting the decrease in operating cash flows were improvements at our Non-Operating Corporate segment, primarily due to a decrease in SG&A expenses, and our Other segment, which had an unrepeated $4.4 million foreign tax payment in the prior year related to the 2023 sale of New Saxon's 19% investment in in HMN.

Investing Activities

Cash provided by investing activities was $39.1 million for the year ended December 31, 2023 as compared to cash used in investing activities of $22.5 million for the year ended December 31, 2022, an improvement of $61.6 million.

The improvement in cash provided by investing activities was primarily driven by the $54.2 million of gross cash proceeds received from the sale of New Saxon's 19% investment in HMN on March 6, 2023 and $5.0 million received from Pansend's partial sale of Triple Ring in 2023.

Capital expenditures, net of disposals for the year ended December 31, 2023 were $16.8 million, as compared to $18.7 million for year ended December 31, 2022, a net decrease in cash used in PP&E activity of $1.9 million, primarily due to the completion of the Spectrum station build-outs in 2022.

Additionally, loans to MediBeacon totaled $4.0 million for year ended December 31, 2023 as compared to $4.5 million for the year ended December 31, 2022, for a decrease in cash outflows of $0.5 million.

Cash used in investing activities was $13.9 million for the year ended December 31, 2024, as compared to cash provided by investing activities of $39.1 million for the year ended December 31, 2023, a decrease of $53.0 million.

The decrease was primarily driven by the $54.2 million of gross cash proceeds received in the prior year from the 2023 sale of New Saxon's 19.0% investment in HMN, and the $5.0 million received from Pansend's partial sale of Triple Ring in 2023.

In addition, during the year ended December 31, 2024 our Non-Operating Corporate segment paid $2.0 million to purchase an investment in mark-to-market securities and our Spectrum segment paid $1.2 million for the acquisition of additional FCC station licenses.

Capital expenditures for the year ended December 31, 2024 were $19.0 million, as compared to $18.4 million for the year ended December 31, 2023, an increase in cash used of $0.6 million.

Proceeds from the disposal of PP&E totaled $10.1 million for the year ended December 31, 2024, and primarily related to the sale of various PP&E at our Infrastructure segment, as compared to $1.6 million in proceeds for the year ended December 31, 2023.

Loans made by our Life Sciences segment to MediBeacon totaled $2.3 million for the year ended December 31, 2024, as compared to $4.0 million for the year ended December 31, 2023, a decrease in cash used of $1.7 million.

Financing Activities

Cash used in financing activities was $65.3 million for the year ended December 31, 2023 as compared to cash provided by financing activities of $68.1 million for the year ended December 31, 2022, an increase in cash used of $133.4 million.

The increase in cash used in financing activities was primarily driven by a decrease in net proceeds from our credit facilities of $99.3 million, primarily from a decrease in net proceeds from Infrastructure's UMB Revolving Line of $84.3 million, as the prior year activity included draws on the line to fund working capital requirements on large complex jobs, and a decrease in net proceeds from our Non-Operating Corporate Revolving Line of Credit of $15.0 million.

Net repayments on other debt obligations increased by $14.6 million for the year ended December 31, 2023, primarily due to principal payments on Infrastructure's Term Loan and other notes payable, partially offset by new debt at R2 from Lancer Capital.

In addition, during the year ended December 31, 2023, we made $15.9 million in distributions to non-controlling interests and redeemable non-controlling interests related to the sale of New Saxon's 19% investment in HMN on March 6, 2023.

The Company also made a $7.0 million payment in connection with the repurchase the DBMGi Series A Preferred Stock during the year ended December 31, 2023, which resulted in a decrease in dividend payments of $3.0 million as compared to the prior year.

Cash used in financing activities was $26.5 million for the year ended December 31, 2024, as compared to $65.3 million for the year ended December 31, 2023, an improvement in financing cash flows of $38.8 million.

The improvement was primarily driven by our Non-Operating Corporate segment, which received $33.2 million in net proceeds in the current year from the Rights Offering and Concurrent Private Placement, as well as an increase in proceeds from other debt obligation due to the net proceeds of $24.8 million received in the current year at our Infrastructure segment from an incremental separate term loan, as compared to proceeds received in the prior year of $4.9 million, which related primarily to proceeds received at our Life Sciences segment from Lancer Capital.

In addition, during the year ended December 31, 2024, our Other segment made $0.3 million in final distributions to New Saxons' non-controlling interests, whereas for year ended December 31, 2023, our Other segment made $15.9 million in distributions, both related to the 2023 sale of New Saxon's 19.0% investment in HMN, for a decrease in cash outflows of $15.6 million.

Our Non-Operating Corporate segment also made a $7.0 million payment in the prior year in connection with the repurchase of the DBMGi Series A Preferred Stock on May 9, 2023 from CGIC, and dividend payments decreased by $1.0 million for the year ended December 31, 2024, as compared to the prior year, due to the repurchase of the DBMGi Series A Preferred Stock in 2024.

For the year ended December 31, 2024, principal payments for debt obligations and repurchases of other debt obligations totaled $28.0 million, as compared to $37.1 million in the prior year, a decrease of $9.1 million, due to a decrease of $14.4 million in principal payments at our Infrastructure segment primarily due to the payoff of certain notes in the prior year, partially offset by a $4.1 million repayment on the CGIC Unsecured Note and a $1.1 million payment for the partial repurchase of our 2026 Convertible Notes at our Non-Operating Corporate segment in the current year.

These improvements in financing cash flows were partially offset by a $47.3 million increase in net outflows from revolving credit line activity for the year ended December 31, 2024, as compared to the prior year, due to net payments by our Infrastructure segment to reduce the outstanding balance on its Revolving Line with UMB.

Infrastructure

Cash flows from operating activities are the principal source of cash used to fund DBMG’s operating expenses, interest payments on debt, and capital expenditures.

DBMG's short-term cash needs are primarily for working capital to support operations including receivables, inventories, and other costs incurred in performing its contracts.

DBMG's short-term cash needs are primarily for working capital to support operations including receivables, inventories, and other costs incurred in performing on its contracts.

DBMG attempts to structure the payment arrangements under its contracts to match costs incurred under the project.

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However, DBMG may expand its operations through future acquisitions and may require additional equity or debt financing.

DBMG is required to make monthly or quarterly interest payments on all of its debt.

DBMG is required to make monthly interest payments on all of its debt.

Based upon the December 31, 2024, debt balance, DBMG anticipates that its interest payments will be approximately $1.5 million for each quarter of 2025.

Off- Balance Sheet Arrangements

We may enter into certain off-balance sheet arrangements in the ordinary course of business.

Our off-balance sheet transactions may include, but are not limited to:

leases that have not yet commenced, short-term leases, liabilities associated with non-cancelable operating leases with durations of less than twelve months, letter of credit obligations, surety, perfo rmance or payment bonds entered into in the normal course of business, and liabilities associated with multi-employer pension plans.

Refer to Note 9.

Leases, Note 13.

Commitments and Contingencies of the Consolidated Financial Statements included in this Annual Report on Form 10-K for additional information on leases and letters of credit and performance and/or payment bonds, respectively.

New Accounting Pronouncements

For information on new accounting pronouncements, refer to Note 2.

Summary of Significant Accounting Policies of the Consolidated Financial Statements included in this Annual Report on Form 10-K, which is incorporated herein by reference for additional information.

Summary of Significant Accounting Policies included in the Consolidated Financial Statements of this Annual Report on Form 10-K, which is incorporated herein by reference, for additional information.

Critical Accounting Estimates

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Refer to Note 2.

Summary of Significant Accounting Policies to our Consolidated Financial Statements included in this Annual Report on Form 10-K, which discusses our significant accounting policies and is incorporated herein by reference.

Summary of Significant Accounting Policies and Note 3.

Revenue and Contracts in Process included in the Consolidated Financial Statements of this Annual Report on Form 10-K, which discuss our significant accounting and revenue recognition policies and are incorporated herein by reference.

Revenue Recognition - Estimated Costs to Complete

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performs its services primarily under fixed-price contracts and recognizes revenue over time using the input method to measure progress for its projects.

The nature of the projects does not provide measurable value to the customer over time and control does not transfer to the customer at discrete points in time.

There is typically no alternative use to the Company for the partially completed construction project, resulting in the recognition of revenue over time as progress is made towards completion rather than at a single point in time.

The customer receives value based on the amount of work that has been completed towards the delivery of the completed project.

The Company transfers control of a good or service over time and, therefore, satisfies a performance obligation and recognizes revenue over time if one of the following three criteria are met:

(a) the customer simultaneously receives and consumes the benefits provided by the Company’s performance as we perform, (b) the Company’s performance creates or enhances an asset that the customer controls as the asset is created or enhanced, or (c) the Company’s performance does not create an asset with an alternative use to us, and we have an enforceable right to payment for performance completed to date.

The Company has determined that one or more of these three criteria are met for such contracts.

The most reliable measure of progress is the cost incurred towards delivery of the completed project.

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Costs include all direct material and labor costs related to contract performance, subcontractor costs, indirect labor, and fabrication plant overhead costs, which are charged to contract costs as incurred.

Revenues relating to changes in the scope of a contract are recognized when we and a customer or general contractor have agreed on both the scope and price of changes, the work has commenced, and that realization of revenue is assured beyond a reasonable doubt.

Revenues relating to changes in the scope of a contract are recognized when we and a customer or general contractor have agreed on both the initial scope and price of any subsequently mutually agreed upon change orders due to a change in scope or other cost factors, the work has commenced, and that realization of revenue is reasonably assured.

Revisions in estimates during the course of contract work are reflected in the accounting period in which the facts requiring the revision become known.

Provisions for estimated losses on uncompleted contracts are made in the period in which a loss on a contract becomes determinable.

Convertible Instruments

We evaluate and account for conversion options embedded in convertible instruments in accordance with ASC 815, Derivatives and Hedging Activities .

Applicable GAAP requires companies to bifurcate conversion options from their host instruments and account for them as free standing derivative financial instruments according to certain criteria.

The criteria include circumstances in which (a) the economic characteristics and risks of the embedded derivative instrument are not clearly and closely related to the economic characteristics and risks of the host contract, (b) the hybrid instrument that embodies both the embedded derivative instrument and the host contract is not remeasured at fair value under other GAAP with changes in fair value reported in earnings as they occur and (c) a separate instrument with the same terms as the embedded derivative instrument would be considered a derivative instrument.

A key component of this analysis includes an calculation of fair value of the embedded derivative instrument, which is performed using inputs that require estimates that management believes are reasonable, such as the projected risk free and volatility rates.

These estimates impacting fair value could materially differ if unanticipated events impacting inputs to the fair value such as the risk free or volatility rates unfold differently than anticipated.

Our annual tax rate is based on our income, statutory tax rates, exchange rates and tax planning opportunities available to us in the various jurisdictions in which we operate.

Tax laws are complex and subject to different interpretations by the taxpayer and respective governmental taxing authorities.

Significant judgment is required in determining our tax expense and in evaluating our tax positions, including evaluating uncertainties under ASC No.

740, “Income Taxes” (“ASC 740”).

Significant judgment is required in determining our tax expense and in evaluating our tax positions, including evaluating uncertainties.

We review our tax positions quarterly and adjust the balances as new information becomes available.

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To provide insight, we use our historical experience and our short and long-range business forecasts.

We believe it is more likely than not that a portion of the deferred income tax assets may expire unused and have established a valuation allowance against them.

We must make significant estimates and assumptions about future taxable income and future tax consequences when determining the amount of the valuation allowance.

Based on consideration of both positive and negative evidence, we determined that it was more likely than not that the net deferred tax assets of the INNOVATE Corp.

consolidated income tax group and other separate entity filers will not be realized.

Therefore, a full valuation allowance was maintained against the net deferred tax assets as of December 31, 2024.

Although realization is not assured for the remaining deferred income tax assets, we believe it is more likely than not the deferred tax assets will be fully recoverable within the applicable statutory expiration periods.

However, deferred tax assets could be reduced in the near term if our estimates of taxable income are significantly reduced.

We recognize deferred tax assets and liabilities for the expected future tax consequences of transactions and events.

Under this method, deferred tax assets and liabilities are determined based on the difference between the book basis and the tax basis of assets and liabilities using enacted tax rates in effect for the year in which the differences are expected to reverse.

If necessary, deferred tax assets are reduced by a valuation allowance to an amount that is determined to be more likely than not recoverable.

We must make significant estimates and assumptions about future taxable income and future tax consequences when determining the amount of the valuation allowance.

The additional guidance provided by ASC 740, clarifies the accounting for uncertainty in income taxes recognized in the financial statements.

Expected outcomes of current or anticipated tax examinations, refund claims and tax-related litigation and estimates regarding additional tax liability (including interest and penalties thereon) or refunds resulting therefrom will be recorded based on the guidance provided by ASC 740 to the extent applicable.

We recognize the tax benefit from an uncertain tax position only if it is more likely than not that the tax position will be sustained on examination by the taxing authorities, based on the technical merits of the position.

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These assessments of uncertain tax positions contain judgments related to the interpretation of tax regulations in the jurisdictions in which we transact business.

Expected outcomes of current or anticipated tax examinations, refund claims and tax-related litigation and estimates regarding additional tax liability (including interest and penalties thereon) or refunds resulting therefrom are estimates recorded to the extent applicable based on management judgement.

The judgments and estimates made at a point in time may change based on the outcome of tax audits, expiration of statutes of limitations, as well as changes to, or further interpretations of, tax laws and regulations.

In relation to tax effects for accumulated other comprehensive income ("OCI"), our policy is to release the tax effects of amounts reclassified from accumulated OCI to pre-tax income (loss) from continuing operations.

Any remaining tax effect in accumulated OCI is released following a portfolio approach.

Refer to Note 12.

Income Taxes to our Consolidated Financial Statements included in this Annual Report on Form 10-K for further information, which is incorporated herein by reference.

The Company’s acquisitions are accounted for using the acquisition method of accounting, which requires, among other things, that assets acquired and liabilities assumed be recognized at their estimated fair values as of the acquisition date.

Estimates of fair value included in the Consolidated Financial Statements, in conformity with ASC 820, Fair Value Measurements and Disclosures , represent the Company’s best estimates and valuations developed, when needed, with the assistance of independent appraisers or, where such valuations have not yet been completed or are not available, industry data and trends and by reference to relevant market rates and transactions.

Such estimates and assumptions are inherently subject to significant uncertainties and contingencies beyond the control of the Company.

Accordingly, the Company cannot provide assurance that the estimates, assumptions, and values reflected in the valuations will be realized, and actual results could vary materially.

Income Taxes included in the Consolidated Financial Statements of this Annual Report on Form 10-K for further information, which is incorporated herein by reference.

Goodwill and Intangible Assets

Goodwill and intangible assets deemed to have indefinite lives are not amortized, but, rather, tested for impairment.

We test goodwill and indefinite lived intangibles for impairment at least annually in the fourth quarter (October 1st) or when factors indicate potential impairment (i.e., events occur or circumstances change that indicate the potential impairment under ASC 350, Intangibles - Goodwill and Other ("ASC 350").

In addition to the foregoing, management reviews goodwill and intangible assets for possible impairment whenever events or circumstances indicate that the carrying amounts of assets may not be recoverable.

Goodwill and intangible assets deemed to have indefinite lives are not amortized, but, rather, are tested for impairment.

We test goodwill and indefinite lived intangibles for impairment at least annually in the fourth quarter (October 1st) or when factors indicate that the carrying amounts of assets may not be recoverable and that there is a potential impairment in accordance with the provisions of ASC 350, Intangibles - Goodwill and Other ("ASC 350").

The factors that we consider important, and which could trigger an impairment review, include, but are not limited to:

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We elect to utilize a qualitative assessment to evaluate whether it is more likely than not that the fair value of a reporting unit or indefinite-lived intangible asset is less than its carrying value, and if so, a quantitative test is performed.

The quantitative evaluation for impairment of indefinite lived intangibles follows the same approach as described with goodwill above and consists of a comparison of the fair value of an intangible asset with its carrying amount.

If the carrying amount of the intangible asset exceeds its fair value, an impairment loss shall be recognized in an amount equal to the excess.

The quantitative evaluation for impairment of indefinite lived intangibles consists of a comparison of the fair value of an intangible asset with its carrying amount.

If the carrying amount of the intangible asset exceeds its fair value, an impairment loss shall be recognized in an amount equal to the excess, limited to the amount of recognized goodwill.

Under the quantitative test, we estimate the fair value of a reporting unit, which requires various assumptions including projections of future cash flows, perpetual growth rates and discount rates.

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indefinite lived intangibles) consist of certain television broadcast licenses.

Intangible assets subject to amortization consists of certain trade names, customer contracts and developed technology.

Intangible assets subject to amortization consist of certain trade names, customer contracts and developed technology.

These finite lived intangible assets are amortized based on their estimated useful lives.

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Refer to Note 8.

Goodwill and Intangibles, Net, to our Consolidated Financial Statements included in this Annual Report on Form 10-K for additional information on goodwill and intangible assets, including any intangible impairments recorded during the years presented, which is incorporated herein by reference.

Goodwill and Intangibles, Net, included in the Consolidated Financial Statements of this Annual Report on Form 10-K for additional information on goodwill and intangible assets, including, if applicable, any intangible impairments recorded during the years presented, which is incorporated herein by reference.

Related Party Transactions

For a discussion of our Related Party Transactions, refer to Note 17.

Related Parties to our Consolidated Financial Statements included in this Annual Report on Form 10-K, which is incorporated herein by reference.

Related Parties included in the Consolidated Financial Statements of this Annual Report on Form 10-K, which is incorporated herein by reference.

Special Note Regarding Forward-Looking Statements

This Annual Report on Form 10-K contains or incorporates a number of "forward-looking statements" within the meaning of Section 27A of the Securities Act of 1933, as amended, and Section 21E of the Securities Exchange Act of 1934, as amended.

Such statements are based on current expectations, and are not strictly historical statements.

The Private Securities Litigation Reform Act of 1995 provides a “safe harbor” for certain forward-looking statements.

We have made statements in this Annual Report on Form 10-K for the fiscal year ended December 31, 2024 (the “2024 Annual Report”) that may constitute “forward-looking statements.” Such statements are based on current expectations, and are not strictly historical statements.

In some cases, you can identify forward-looking statements by terminology such as "if," "may," "should," "believe," "anticipate," "future," "forward," "potential," "estimate," "opportunity," "goal," "objective," "growth," "outcome," "could," "expect," "intend," "plan," "strategy," "provide," "commitment," "result," "seek," "pursue," "ongoing," "include" or in the negative of such terms or comparable terminology.

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Factors that could cause actual results, events and developments to differ include, without limitation:

the ability of our subsidiaries (including, target businesses following their acquisition) to generate sufficient net income and cash flows to make upstream cash distributions, capital market conditions, our and our subsidiaries’ ability to identify any suitable future acquisition opportunities, efficiencies/cost avoidance, cost savings, income and margins, growth, economies of scale, combined operations, future economic performance, conditions to, and the timetable for, completing the integration of financial reporting of acquired or target businesses with INNOVATE or the applicable subsidiary of INNOVATE, completing future acquisitions and dispositions, litigation, potential and contingent liabilities, management’s plans, changes in regulations and taxes.

We claim the protection of the safe harbor for forward-looking statements contained in the Private Securities Litigation Reform Act of 1995 for all forward-looking statements.

the ability of our subsidiaries (including, target businesses following their acquisition) to generate sufficient net income and cash flows to make upstream cash distributions, capital market conditions, our and our subsidiaries’ ability to identify any suitable future acquisition opportunities, efficiencies/cost avoidance, cost savings, income and margins, growth, economies of scale, combined operations, future economic performance, conditions to, and the timetable for, completing future acquisitions and dispositions and the successful integration of acquisitions with INNOVATE or the applicable subsidiary, litigation, potential and contingent liabilities, management’s plans, changes in regulations and taxes.

Forward-looking statements are not guarantees of performance.

You should understand that the following important factors, in addition to those discussed under the section entitled "Risk Factors" in this Annual Report on Form 10-K and the documents incorporated herein by reference, could affect our future results and could cause those results or other outcomes to differ materially from those expressed or implied in the forward-looking statements.

You should understand that the following important factors, in addition to those discussed under the section entitled "Risk Factors" in Item 1A of this Annual Report on Form 10-K and the documents incorporated herein by reference, could affect our future results and could cause those results or other outcomes to differ materially from those expressed or implied in the forward-looking statements.

You should also understand that many factors described under one heading below may apply to more than one section in which we have grouped them for the purpose of this presentation.

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Our actual results or other outcomes may differ from those expressed or implied by forward-looking statements contained herein due to a variety of important factors, including, without limitation, the following:

• the recent passing of our Chief Executive Officer, President and Director and the successful transition of his management responsibilities;

• our dependence on distributions from our subsidiaries to fund our operations and payments on our obligations;

• substantial doubt about our ability to continue operating as a going concern;

• the impact on our business and financial condition of our substantial indebtedness and the significant additional indebtedness and other financing obligations we may incur;

• the impact of covenants in the Indenture governing INNOVATE’s 2026 Senior Secured Notes, 2026 Convertible Notes, CGIC Unsecured Note and Revolving Credit Agreement, the Certificates of Designation governing INNOVATE’s Preferred Stock and all other subsidiary debt obligations as summarized in Note 11.

• the impact of covenants in the Indenture governing INNOVATE’s 2026 Senior Secured Notes, 2026 Convertible Notes, CGIC Unsecured Note and Revolving Line of Credit, the Certificates of Designation governing INNOVATE’s Series A-3 Preferred Stock and Series A-4 Preferred Stock and all other subsidiary debt obligations as summarized in Note 11.

Debt Obligations to our Consolidated Financial Statements included in this Annual Report on Form 10-K and future financing agreements on our ability to operate our business and finance our pursuit of acquisition opportunities;

• our possible inability to generate sufficient liquidity, margins, earnings per share, cash flow and working capital from our operating segments;

• our dependence on certain key personnel;

• our dependence on certain key personnel including the passing in 2023 of Mr.

Barr, our former CEO, President and Director and the successful transition of his management responsibilities;

• bank failures or other similar events that could adversely affect our and our customers' and vendors' liquidity and financial performance;

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• the potential for, and our ability to, remediate future material weaknesses in our internal controls over financial reporting;

• the impact of recent supply chain disruptions, labor shortages and increases in overall price levels, including in transportation costs;

• the impact of a higher interest rate environment;

• the effects related to or resulting from military actions in Israel and the Gaza Strip and Russia's military action in Ukraine, including the imposition of additional sanctions and export controls, as well as the broader impact to financial markets and the global macroeconomic and geopolitical environment;

• changes in market conditions, including from political regulatory or market uncertainty, changes in foreign exchange rates, interest rates or inflation, supply chain disruptions, labor shortages and increases in overall price levels, including in transportation costs;

• increased competition in the markets in which our operating segments conduct their businesses;

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• uncertain global economic conditions in the markets in which our operating segments conduct their businesses;

• the effects related to or resulting from ongoing and recent geopolitical events, such as the political unrest and military conflicts in the Middle East, Russia and Ukraine, including the imposition of additional sanctions and export controls, as well as the broader impact to financial markets and the global macroeconomic and geopolitical environment;

• the impact of catastrophic events, including natural disasters, pandemic illness and the outbreak of war, or acts of terrorism;

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• tax consequences associated with our acquisition, holding and disposition of target companies and assets;

• our ability to remain in compliance with the listing standards of the New York Stock Exchange;

• our ability to remain in compliance with the listing standards of the NYSE;

• the Reverse Stock Split may not result in a sustained increase in the per share price of our common stock;

• the ability of our operating segments to attract and retain customers;

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• management’s assessment of market factors and competitive developments, including pricing actions and regulatory rulings;

• our expectations and timing with respect to any strategic dispositions and sales of our operating subsidiaries, or businesses, including the shut-down of our Network business by our Spectrum segment, that we may make in the future and the effect of any such dispositions or sales on our results of operations;

• our expectations and timing with respect to any strategic dispositions and sales of our operating subsidiaries, or businesses, that we may make in the future and the effect of any such dispositions or sales on our results of operations;

• the possibility of indemnification claims arising out of divestitures of businesses;

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• changes in the costs or availability of, or delivery schedule for, equipment, components, materials, labor or subcontractors;

• the impact of inflationary pressures;

• changes in economic conditions, including from the impact of inflationary pressures and changes in interest rates;

• adverse outcomes of pending claims or litigation or the possibility of new claims or litigation, and the potential effect of such claims or litigation on DBMG’s business, financial condition, results of operations or cash flow;

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• governmental regulation in the healthcare industry;

• our Life Science's segment possible inability to raise additional capital when needed or refinance its existing debt, on attractive terms, or at all.

• our Life Sciences segment possible inability to raise additional capital when needed or refinance its existing debt, on attractive terms, or at all.

Spectrum / HC2 Broadcasting Holdings Inc.

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What changed 10-K

Item 7. Management’s Discussion and Analysis